On a year-ago basis the US economy grew at it fastest pace in the second quarter this year since the first quarter of 2005. Year-on-year growth accelerated from an adjusted 2.39% in the first quarter to 3.17%. This was in line with the 3% to 3.5% implicated by the GDP-weighted PMI as I indicated a week or two ago.
Sources: I-Net Bridge; Plexus Asset Management.
The focus is now on the crucial ISM PMI Manufacturing and Non-manufacturing data for July due this week. I expect both numbers to come in somewhat weaker than June’s 56.2 for Manufacturing and 53.8 for Non-manufacturing, but both should remain comfortably above 50 and therefore continue to indicate expansion of the US economy, albeit at a more moderate rate.
I will not be surprised to see the GDP-weighted PMI falling to the 52.5/53 range from the current 54.36 level. That will imply that growth in the US economy has slowed to approximately the 2% to 2.5% range.
Lower numbers would certainly be fuel for the double-dip advocates! However, I believe the coming slowdown is a respite from the strong growth experienced over the past year and therefore from elevated levels. All other things being equal (therefore barring global shocks), growth should start to gain traction from the fourth quarter onwards.
