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4 Reasons to be Worried About US GDP Growth

The GDP growth figure for the US in Q3 2012 was revised from 2% to 2.7% (annualized). This is a significantly healthier level of growth, yet it was a bit lower than 2.8% that was expected.  

The more worrying part isn’t in the minor headline disappointment, but in the details. Here are 4 reasons to be worried.

The US dollar is trading a bit higher on risk aversion, with EUR/USD retreating from 1.30.

  1. Lower consumption growth: The vast majority of the US economy is in consumption, and this part was revised to the downside: 1.4% instead of 2% originally reported.
  2. Bigger Drop in Investment: The level of investment is important for future growth. A drop of 2.2% instead of 1.3% originally reported is worrying.
  3. More Inventories: Building inventories is certainly legitimate growth, but it means that inventories could contract in the near future. So, having a lot of growth in this component isn’t that positive.
  4. Less trade: A more narrow trade deficit is positive for the US and for the US dollar. Unfortunately, this lower deficit isn’t only a result of exports, but of less imports, and less global trade in general. Also here, the components matter.

During Q4, the US probably enjoyed more growth, yet slow growth once again. The data will likely be distorted due the effect of Sandy. Hopefully, some rebuilding in the aftermath of Sandy + intense Christmas shopping will make growth better.

EUR/USD rose towards 1.30 as positive statements were heard from Washington regarding the fiscal cliff. However, it has a hard time breaking higher.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.