US: Q4 GDP growth maintains momentum – Nomura

Analysts at Nomura explain that in the advanced reading, US Q4 real GDP growth increased at a rate of 2.6% q-o-q saar, in line with their expectations but slightly below consensus (Nomura: 2.6%, Consensus: 3.0%).

Key Quotes

“Overall, this was a strong reading, consistent with sustained economic momentum heading into 2018 while weighed down slightly by net exports and inventory investment. Note that, hurricane-related factors boosted economic growth somewhat in Q4 and without weather effects, the top-line growth would have slowed further from a back-to-back above 3% growth in Q2 and Q3. We continue to believe that the potential growth rate remains low by historical standards, drifting around 1.7%.”

“Latest Q4 2017 GDP data are consistent with our positive outlook for 2018 growth. Importantly, although hurricane-related boost is waning, the healthy reading of 2.6% does not include what we view as modest growth effects from the recently enacted tax bill that will start in Q1 2018. Moreover, we expect Congress to agree on lifting spending caps on discretionary spending, boosting economic growth further in 2018. As a result, we think that the economy will likely grow at a faster pace than its potential this year.”