Economic growth for the first quarter is looking rather lackluster with economists and analysts noting a confluence of factors for the drag.
However, improved weather patterns could help induce consumer spending, but it will likely be in the home improvement segment and not with fashion apparel. Higher fuel prices is also expected to impact spending, and create “headwinds” in the second half.
Christ Christopher, director at IHS Global Insight’s economics unit, told clients in his research report today that the first quarter gross domestic product will likely increase 1.1 percent, which is “a similar pace as [the fourth quarter of 2015] with consumers and housing doing most of the heavy lifting.”
“Our real consumer spending growth outlook for the first quarter is estimated at 1.9 percent, up from 1.6 percent in our April 4 forecast, mostly due to upward revisions to February’s retail sales used to estimate consumer spending,” Christopher said adding that fourth-quarter real GDP growth was 1.4 percent, and real consumer spending gained 2.4 percent.
Christopher said he expects “weak GDP growth to persist into the first quarter.”
Weather trends could help boost consumer spending, but warmer temperatures might push consumers to summer purchases instead of spring merchandise. Corinna Freedman, equity analyst at BB&T Capital Markets, said “despite a cold start to April, temperatures are expected to be above normal across the U.S. according to the 6 to 10 day outlook.”
“Early-mid April temperatures were below average along the East Coast, with the Western U.S. seeing warmer-than-normal temperatures,” Freedman said. “Warm weather is expected to blanket the vast majority of the U.S. within the next week.” And that could be a “boon” to summer products said as sandals, she said.
Craig Johnson, president at Customer Growth Partners, recently noted the uptick in gas prices, and said the savings gap compared to last year will “probably disappear as summer approaches, turning into a real headwind.”
In regard to consumer spending in the first quarter, Johnson said it is “not so much a sign of huge strength this year, but of weakness last year — other than home improvement, which is indeed strong.”
“This deferred demand factor will reverse out in [the first quarter], and we believe that by the time you get to the second half, retail sales will balance out close to our original plus-2.4 percent forecast,” Johnson added.