Fade the negative GDP headline
GDP contracted 0.1% in Q4, significantly below expectations. However, we advise fading the headline number given distortions in the data. Growth was dragged down by a sharp contraction in government defense spending and inventory accumulation, which combined subtracted 2.6pp from growth. Outside of these two very volatile components, underlying growth improved with a solid gain in business investment. We believe today’s report suggests upside risk to our forecast of 1.0% for Q1 GDP.
Read the full report here.