NAB, explains that US GDP growth was sluggish at the start of 2017 but other indicators are more positive, and they expect to see a rebound over the rest of the year. The US economy got off to a sluggish start to 2017 according to US GDP data. The Advance estimate for March quarter 2017 US GDP showed growth of just 0.2% qoq (0.7% annualised). However, there has been a tendency for March quarters to be relatively weak in recent years and the details of the report were better than the headline figure. In particular, business investment improved and some of the factors holding back growth – delays in tax refunds, unseasonal weather depressing utility consumption and slower inventory growth – are temporary in nature. Moreover, surveys of business conditions and household confidence remain solid, and do not point to a slowdown in activity. Based on historical relationships, the latest ISM business survey readings are consistent with GDP growth of 0.9% qoq, well above the March quarter result. Similarly, surveys of households do not point to any weakening of sentiment which could explain the marked slowed in consumption in the March quarter. It is not only business conditions and consumer sentiment measures which point to an economy still humming along. Labour market indicators remain consistent with an economy growing above its longer-term trend rate. The Fed’s latest member projections of the fed funds rate point to a gradual tightening of monetary policy over time. The Fed has indicated that policy tightening won’t just be in the form of rate rises, but there will also be an unwinding of the Fed’s large balance sheet (built up through the QE programs) which is likely to start later this year. This policy outlook is based around the view that the Fed has largely met its full employment mandate and that inflation is trending back to the Fed’s 2% target, as the increasingly tight labour market adds to price pressures.