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US Manufacturing Showing Some Weakness

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The Federal Reserve Bank of Kansas City has just published it’s quarterly survey of manufacturers in the region. This survey captures data from over 300 industrial participants and often provides good guidance on the overall manufacturing sector in the US due to the geographical spread of respondents around the core US manufacturing centers. This Manufacturing Survey taken over the three months to June is showing a fall off in sentiment to 2, this reverses a trend from the previous result of 14.

The US markets are still absorbing the implications of yesterday’s surprise Q1 GDP announcement. The Commerce Department published final numbers for the quarter which showed that the economy actually contracted by 2.9% during the first quarter of the year instead of the 1.0% reported in the preliminary figures. This represents the worst quarter for GDP growth since 2009.

Poor winter weather conditions have to date been held responsible for the sluggish economic start to the year, it is now however looking unlikely that this factor can be entirely blamed for the contraction, particularly given the magnitude of the revision to the figures. It has been over 35 years since a preliminary US GDP figure has undergone a revision of this scale.

The weather no doubt played some role in the negative GDP readings, economists are estimating this to be in the region of 1%-2% of the overall fall but as of yet no detailed breakdown of the figures has been made available. The introduction of Obamacare during the quarter is being cited as one possible explanatory factor for the heavily skewed GDP number, global issues such as the slow Chinese start to the year are also likely to have contributed to disappointing trade figures which weighed on overall US growth. It is now likely that Q2 GDP projections will be revised downward but nonetheless the second quarter is still slated to greatly outperform the first.

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