Starting the year with a -2.9% quarterly growth reading is like falling behind 2 goals to Brazil in the World Cup — coming back will be very difficult.
The consensus for Q2 growth is 3.5% annualized followed by 3.1% in Q3 and Q4. Tally it up and that’s just 1.7% for the year, which would be the worst since 2009.
Now with the negative revision to Q1, there could be some upside in future quarters but maybe not as much as you’d think. The drags were healthcare, exports and inventories — only inventories have a ‘give back’ built in and that’s mostly factored into GDP estimates.
To hit 2% growth, the average quarterly GDP pace will need to be 3.6% from Q2 through year end.
What’s troubling is that the Fed has no idea what’s going on. In December the Fed was forecasting around 3% growth and not one FOMC member forecast growth below 2%.
