A big disappointment for the US economy: a mere 0.1% growth, significantly worse than expected. In the first release of GDP, the US was expected to report an annual growth rate of 1.2% after a gain of 2.6% in Q4 2013 and 4.1% in Q3 2013. The various winter storms that hit the US during January, February and also in early March are seen as responsible for lower economic growth (as reflected by other economic measures released during the quarter).
Before the release, EUR/USD traded around 1.3840, GBP/USD at 1.6820 and USD/JPY around 102.50. The dollar is now weaker.– more coming.
EUR/USD climbs to 1.3860, GBP/USD is at 1.6840, USD/JPY drops to 102.30. USD/CAD hangs around 1.0955, AUD/USD is at 0.9275 and NZD/USD at 0.8575.
The data
The headline is a clear disappointment. While the consumer was still quite active, probably thanks to internet shopping, the economy et large was on the verge of contraction and this is the weakest since Q4 2012.
More data: Personal consumption rose 1.4% (QoQ). The employment cost index rose 0.3% as well and the GDP Price Index is 1.3% higher. All are misses as well. The only positive is a rise of 1.3% in core personal consumption expenditures.
Regarding inflation, the Fed can find comfort in the Core PCE print: 1.3% against 1.2% predicted.
Business investment is a worry: a drop of 2.1% after a leap of 5.7% in Q4. The buildup of inventory in previous quarters boomeranged now: 0.57% shaved off GDP growth.
More expectations: the employment cost index was expected to rise 0.5%, personal consumption 1.4% q/q, core personal consumption q/q +1.2%. All are short of expectations.
Expectations for a spring bounce are probably much higher now, even if this disappointing report cannot be blamed on the weather. Subsequent revisions will probably lift GDP only marginally. The revised data, coming from the second part of the quarter, was also a period that included storms.
Background
This is the first release out of three, and often we have seen unscheduled revisions to older data.
Shortly before the publication, the ADP Non-Farm Payrolls report was released and it came out better than expected. A gain of 220K private jobs were reported, and last month’s figure was revised to the upside.
The last figure for the day in the US is the Chicago PMI for April, which has recently gained more traction. Yet this is certainly not the last big event of the day: Janet Yellen and her colleagues at the FOMC will release their decision.
Share
