US: Downside risks beginning to recede – Nomura

By FXStreet Research Team at Nomura, suggests that the US the manufacturing sector faces strong headwinds and will weigh on growth, but the rest of the economy remains resilient.

Key Quotes

“Activity: Personal consumption and residential fixed investment came in stronger than our expectations in Q4, which suggests better momentum heading into 2016. But manufacturing activity has been severely hampered by declining oil prices and the strong dollar. Investment in oil and gas drilling activity declined further in Q4, and we expect further drag to start the year. But given the already low level of investment in this sector, the negative contribution to growth should be more modest than in the past.

Other parts of the industrial sector seem to be struggling as well. Manufacturing surveys continue to indicate that manufacturing activity remains tepid, and the relatively low rates of capacity utilization of the industrial sector coupled with slowing exports should constrain business equipment investment. The second estimate of Q4 GDP showed that inventory investment was less of a drag than previously reported, implying we may see further drawdown in Q1.

Taking all of these factors into account, we expect top-line growth to clock in at 1.3% in Q1 2016 before reaccelerating closer to 2% in …read more

Source:: FX Street