• GDP growth is expected to decelerate modestly in the March quarter, partly reflecting the temporary impact of a severe winter.
• Following GDP growth of 1.9% in 2013 we are forecasting GDP will grow by 2.6% in 2014 (previously 2.8%) and 2.9% in 2015. The change to 2014 forecast primarily reflects the impact of revisions to historical data.
• Fed tapering of its QE program is likely to continue through 2014, with the program ending in the December quarter. No change in the fed funds rate is expected until well into 2015.

Tracking the strength of the U.S. economy has been complicated by the severe winter that has been experienced. Quite a few indicators have weakened, and while it is easy to say that is weather related, it is not possible to be sure or to quantify the extent. It is also likely that other factors are at play – we had been expecting some slowdown from the strong growth of the second half of 2013 which had been in part driven by inventory accumulation.

The softening in the data can be seen in our composite of the ISM manufacturing and non-manufacturing surveys. After a large fall in January, the manufacturing survey recovered some ground in February, however, the non-manufacturing indicator fell to its lowest level in four years and while it is still above 50 (indicating continuing growth) the net result is that the ISM composite measure is at its lowest level in quite a while.

For further analysis download the full report.

• US Economic Update – March 2014 (PDF, 235KB)