Weak start but positioned for rebound.
While the advance estimate of real US GDP growth in Q1 2017 stood at a paltry 0.7%, the Federal Open Market Committee’s statement released after its 2–3 May meeting echoed the view that the first-quarter weakness was “transitory,” indicating the Fed is on track for two more rate hikes this year. Real GDP growth marked the weakest in three years as consumer spending stalled and inventory accumulation slowed sharply. IHS Markit forecasts that real US GDP growth will rebound sharply in the second quarter to 3.4%, led by consumer spending. Our long-term forecast assumes the Federal Reserve will adjust monetary policy to keep inflation near a 2% target.