Today the economic calendar is empty in Europe but in the US session, we have some major releases, with the US Q1 GDP and Unemployment Claims. They are likely to offer some volatility, especially the GDP price index which is expected to increase, while the GDP growth is expected to slow somewhat.

Q1 GDP Expectations

The preliminary estimate for Q1 2024 GDP growth is expected to decrease to 2.1% from 3.4% in Q4, with analyst expectations ranging from 1.9% to 2.4%. However, the Atlanta Fed’s GDPNow estimate for Q1 growth is slightly higher at 2.9%. Despite some positive indicators, such as the expansionary territory in the services sector, as indicated by ISM statistics, there have been fluctuations.

The services sector’s index fell from 53.4 points in January to 52.6 points in February and 51.4 v in March. Similarly, the manufacturing sector saw inconsistency, with the ISM manufacturing headline dropping to 49.1 points in January, falling further to 47.8 points in February, but returning to expansionary territory at 50.3 points in March. Consumer spending proxies have shown mixed results, with January retail sales disappointing but improving in February. However, the Retail Control component remained unchanged. Inflation data has been on the high side of projections, influencing Fed expectations. Moody’s analysts anticipate GDP growth to be less than 2%, but this is not necessarily cause for alarm given recent unsustainable expansion. The March PCE data, scheduled for Friday, will provide a more timely update on inflation.

If another quarter of approximately 2.0% growth is observed, it would indicate an increase in productivity. Spending expenditures likely increased by more than 3.0%, with service spending outpacing goods consumption. This trend suggests a shift towards services in consumer preferences and economic activity, which could reflect changes in lifestyle and behavior, as well as broader shifts in the economy.

Goldman Sachs Forecasts Strong GDP Growth

Goldman Sachs has revised its forecast for Q1 GDP growth to 3.1%, up from 2.5% previously, and significantly above the consensus estimate of 2.5%. Analysts at the bank have taken into consideration solid US consumer spending and a strong labor market as contributing factors. March payrolls increased by 303,000, with unemployment at 3.8%, and industrial production also rose by 0.4%. These positive indicators suggest robust economic activity during the first quarter of the year.