The US economy grew by 0.7% in Q1 2017 on an annualized level. This is below official expectations but perhaps above the “whisper numbers” especially after yesterday’s mediocre durable goods orders. Personal consumption came out at 0.3%, well below 0.9% predicted and 3.5% in Q4 2016.
The US dollar is on the rise. Markets were probably projecting an even worse number. Nevertheless, a 0.7% annualized rate is less than 0.2% q/q. It is also the worst quarterly figure in three years.
This GDP report is not bad enough to rule out a rate hike in June, but certainly, puts it in doubt. Will the greenback drop later on?
The US was expected to report a growth rate of only 1.3% annualized in Q1 2017, down from 2.1% in Q4 2016 and after a mediocre 2016 that saw sub 2% growth. See how to trade the GDP with EUR/USD.
The US dollar was on the back foot ahead of the publication.
Follow the live coverage with Valeria Bednarik, Mauricio Carrillo and myself: Scroll down for background information.
Q1 GDP background – hard vs. soft data
Early indications for the first quarter looked worse than the 1.3% projected by economists. The Atlanta Fed’s Nowcast was revised down throughout the quarter, with the latest update showing a meager 0.2% annualized rate, or under 0.1% q/q.
Retail sales, durable goods orders and other measures of “hard data” fell short of expectations. The most recent bulk release was quite poor. Hard data is actual economic activity seen in the past.
The soft data painted a different picture. Consumer and business surveys reflected optimism. Optimism and confidence tend to translate into future consumption and investment. Usually, hard and soft data go hand in hand, but not this time. Divergence has been massive.
More: US GDP Preview: Is the US economy grinding to a halt? Finally the hardest data of all [Video]
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