Wall Street More Pessimistic on US Economy

Federal Reserve officials will probably cut their forecasts for economic growth when they gather again next month, though not enough to deter their intent to raise interest rates later this year.

The median respondent to a survey of 79 economists conducted by Bloomberg from May 8 to May 13 said U.S. gross domestic product would grow 2.3 percent in the final quarter of 2015 from a year earlier, down from the 2.7 percent median estimate in April.

That compares with a 2.5 percent midpoint of the central tendency of estimates submitted by Fed officials at their March meeting, the last time they issued updated forecasts. The central tendency denotes the range of estimates excluding the three highest and three lowest of the 17 policy makers’ projections.

Economic data released since the Federal Open Market Committee’s March forecasts have revealed unexpected weakness in the first quarter. Economists have attributed this to mostly transitory factors such as the rise of the dollar, a drop in oil prices, harsh winter weather and a slowdown at West Coast ports due to labor disputes.

Forecasting firm Macroeconomic Advisers now estimates the U.S. economy contracted at a 0.9 percent seasonally adjusted annualized rate in the first three months of the year.

The central question now: Will the slowdown prove temporary or will it persist? The arrival of the first round of April data in recent days has prompted analysts to begin marking down estimates for the current quarter as well.

And economists don’t necessarily expect growth over the next few quarters to make up for the surprise drop in the first quarter, unlike in 2014, when a surprise contraction in the first quarter was made up over the rest of the year.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.