After a small uptick in March, Fathom’s US Economic Sentiment Indicator (US ESI) declined again last month, touching a 29-month low of 3.8%. We have long argued that the gap between sentiment and real GDP growth would close – with the former likely to decline and the latter likely to increase. By and large this has taken place, albeit at a slower pace than we initially expected. Looking ahead, it would not be a surprise if both GDP growth and sentiment continued to tick down this year and into 2020, as the effects of the large fiscal stimulus package fade and the economy runs into capacity constraints. Last week’s economic data paint a mixed picture at the start of Q2: housing data – including starts, and the NAHB survey – suggest that the last year’s wobble in the housing market has stabilised; manufacturing data for April were soft; retail sales may have slipped in April, but this followed a very strong reading in March.
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