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Shrinking output gap points to slower growth

Q1 GDP growth was revised up to 0.7% q/q from 0.4% but we don’t think this strong performance will be sustained. One reason is that the output gap has narrowed significantly and points to a slowdown in GDP growth. Between falling real disposable incomes and a looming exports downturn, we expect the economy to be in recession in the second half of the year.

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