The United States (U.S.) Commerce Department reported gross domestic product (G.D.P.) rose to a 2.8% annualized rate...
The United States (U.S.) Commerce Department reported gross domestic product (G.D.P.) rose to a 2.8% annualized rate in the fourth quarter, a pace not seen greater since the second quarter of 2010. Growth occurred with companies replenishing inventories by $56.0 billion. Yet, the rate fell below economists’ expectations of 3.0%. The inventory increases added 1.94 percentage points to the country’s GD.P. Excluding inventory increases growth grew a minimal 0.8% rate. Exports provided stable demand although the global economy shows slowing while imports increased lowering G.D.P. by 0.11 percentage points. Furthermore business capital goods purchases lessened in the fourth quarter with a meager 1.7% increase compared to a 15.7% increase in the third quarter. Business capital goods purchases were the smallest since 2009.
Consumer spending that makes up 70.0% of the country’s economic activity moved higher by 2.0% compared to the third quarter that came in at 1.7 percentage points. The increase was mainly caused by improved demand for motor vehicles. For the year, growth increased 1.7%, although the previous year (2010) had seen growth expand by 3.0%. According to analysts, the year’s (2011) fourth quarter growth figures do not provide a positive prospect for growth in the beginning of 2012. The Federal Reserve met earlier this week on Wednesday. They project growth to be within a 2.2%-2.7% rate for the year and are considering additional asset purchases to stimulate economic activity. Additionally, the Reserve took steps to combat softening economic growth by extending the record low interest rate through at least an additional year (at least through 2014). The Federal Reserve is attempting to buffer negative effects caused by the European region’s fiscal crises.
The weaker than expected GDP report sent the Dollar weaker in today’s U.S. session. The EURUSD broke above resistance at 1.3150, which was the high on December 21st. With the market sentiment positive on all but complete Greek deal, this EURUSD rally could still have strength. We expect the EURUSD to target 1.3300 if things go well for Greece next week.
Eugene Ross, Analyst
Admiral Markets
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