Deutsche Bank just hacked its Q1 GDP estimate to 1.7% from 2.4% - and it might not be done lowering expectations
In a note on Monday following the latest report on personal income and spending, LaVorgna cut his Q1 GDP tracking estimate to 1.7% from 2.4%.
And LaVorgna might not be done hacking his expectations for the quarter.
From LaVorgna:
[Monday's] February consumer spending figures were weaker than what we had expected. While December real consumer spending was revised up a couple of tenths, this was bookmarked by downward revisions to November and January. Instead of running near 4% for the quarter as we had thought, it appears that consumption is going to run significantly less than that when the advance Q1 GDP report is published on April 29. Surprisingly, household spending on utilities is running significantly below what the Fed's utility production series, an excellent proxy of the former, suggests ... For now, though, we are reducing our estimate of Q1 consumption to 2%, which has the effect of lowering our forecast of Q1 GDP by 70 bps to 1.7% from 2.4% ... Unfortunately we may not yet be done pruning our estimate of Q1 real economic output because there is a risk that the February international trade data, which are released on Thursday could be disappointing.
Here's the chart from Deutsche Bank showing the discrepancy in what industrial production figures indicate and what Monday's PCE data showed on consumption.
And so while these numbers will, in LaVorgna's view, eventually square, our first reading on Q1 GDP in about a month is likely to disappoint.
Deutsche Bank
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