The US economy grew at an annual pace of 2.8% in the fourth quarter of 2011. Expectations stood on a growth rate of 3.1%. This is a small disappointment.
After a few minutes of choppy trading, the dollar is strengthening against all currencies apart from the yen. The disappointment, especially with the components of the weaker than expected growth, triggers risk averse trading, after a week that was full with optimism and even euphoria. EUR/USD is under 1.3130 once again.
Also the Aussie, kiwi, pound, loonie and Swissie are falling. The yen is on the run.
Economic indicators released during Q4 were quite positive. This included retail sales, durable goods orders and purchasing managers’ indicators.
A lot of the growth seen in Q4 was of inventories, not consumption. This casts worries. In addition, the expiry of tax incentives in Q4 could turn into less activity in Q1.
The US economy grew at a pace of 1.8% in Q3, after a very slow first half.
However, the Federal Reserve still fears that global headwinds will hurt the US economy and is specially troubled by the situation in the housing sector. Even if growth is strong and the labor market continues improving, the housing sector’s situation will still remain the main driver for QE3.
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