Possible contraction in Q2, all roads lead to a fiscal loosening

The chances of the economy escaping a quarterly contraction in Q2 seem to be receding in light of the latest surveys and official data. While a contraction in Q2 would generate many headlines, it needs to be taken in context with Q1. Over both quarters, GDP probably rose by 0.2% q/q on average – a little slower than 2018’s 0.3% rate, but not dramatically so. Meanwhile, regardless of the political situation, a substantial fiscal loosening seems to be in store.