Stronger US GDP in Q2

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PETALING JAYA: The US gross domestic product (GDP) is anticipated to grow at a much stronger pace in the second quarter, underpinned by stronger retails sales, according to AmBank Group. 

Its chief economist Anthony Dass said on Tuesday he expect the second quarter GDP to be much stronger, supported by strong consumer spending which should grow around 3.7% due to tax cuts, and net exports that would help lift GDP growth by about 1% in the said quarter. 

“Hence, we have revised the second quarter growth GDP growth to 3.8% from previously 2.8%, higher than the first quarter growth of 2.2%. If
the economy grows at our projected growth rate, it would be the best since the third quarter of 2014,’’ he noted.

Retail sales in May was up 0.8%, while excluding autos, sales rose 0.9%.

For the full year of 2018, He reiterated the group’s 2.8% GDP growth with room to touch 3.0%. 

“Although we expect the household tax cuts to provide a strong boost to consumer spending, it could potentially fizzle out. For a sustainable growth over the medium to longer term, we believe there is a need for corporate tax cuts,’’ Dass added.

For 2019, he said the GDP projection remains at 2.3%, adding that much would depend on whether the economy could get through the trade war issues. A trade war blow-up would most likely choke the economy, Dass said.

On the interest rate direction, he said the group has now factored in a total of four rate hikes by the Fed in 2018 with the next rate hike in September and followed by December. 

For 2019, Dass said he was still looking at two rates hikes with the policy rate normalising at 2.75%–3.00%.