Mixed US activity in the first quarter

While the overall US economy expanded at a robust 3.2% in the first quarter of 2019, growth in underlying domestic demand appears less impressive. For instance, household consumption growth slowed to 1.2% from 2.5% in the last quarter of 2018. The more volatile components such as inventory change and net trade added a combined +1.7% to Q1 GDP growth. This suggests some potential payback in growth in upcoming quarters. Inflation measures also slowed from last year. The data support the Fed’s patient stance on interest rates.

Eurozone manufacturing remains weak

Survey data on German business conditions disappointed in April, after staging a brief recovery in March. The manufacturing sector remains the key area of weakness. Meanwhile, in France, overall business confidence was slightly improved in April, but manufacturing remained weak. President Macron has announced a new round of reforms, most notably new tax cuts.