USD: US Q1 GDP Growth Below Expectations
US Q1 GDP data came at 1.6% QoQ versus 2.5% expected and 3.4% printed in the Q4 2023. This data shows deceleration in the consumer spending, exports, Local and state Governments, FED also lower its spending after the rate hikes. But this downturn is offset by residential Fixed investments and imports. GDP Price index rose to 3.1% in Q1 from 1.7% printed in the last quarter.
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US Dollar moved higher after the data printed in strong numbers.
US Gross Domestic Product (GDP) Expands Less Than Expected in Q1, According to BEA Data
The latest data from the US Bureau of Economic Analysis (BEA) indicates that the country’s Gross Domestic Product (GDP) expanded by 1.6% on an annualized basis in the first quarter of 2024. This growth figure falls short of market expectations, which had anticipated a 2.5% expansion. The Q1 performance follows a 3.4% growth rate recorded in the previous quarter, Q4 2023.
The BEA’s press release highlights that the deceleration in real GDP growth during Q1 was primarily driven by slower growth in consumer spending, exports, and state and local government spending, along with a downturn in federal government spending. However, these declines were partially offset by an acceleration in residential fixed investment. Notably, imports also saw an acceleration during this period.
Moreover, the GDP Price Index, a measure of inflationary pressures in the economy, rose by 3.1% in Q1, slightly exceeding expectations of a 3.0% increase. This uptick represents a notable acceleration from the 1.7% gain recorded in the previous quarter, signaling a potential rise in inflationary pressures during the period.
USD: Q1 GDP Growth Slows to 1.6%, Below Expectations
US Q1 GDP data came at 1.6% QoQ versus 2.5% expected and 3.4% printed in the Q4 2023. This data shows deceleration in the consumer spending, exports, Local and state Governments, FED also lower its spending after the rate hikes. But this downturn is offset by residential Fixed investments and imports. GDP Price index rose to 3.1% in Q1 from 1.7% printed in the last quarter.
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US Dollar moved higher after the data printed in strong numbers.
U.S. economic growth stumbled at the beginning of the year, missing expectations, while inflationary pressures surged, according to data released Thursday by the Commerce Department.
Gross Domestic Product (GDP), a key measure of the nation’s economic output during the period from January to March, expanded at a tepid annualized rate of 1.6% when adjusted for seasonal fluctuations and inflation, as reported by the Bureau of Economic Analysis (BEA).
Economists surveyed by Dow Jones had anticipated a more robust expansion of 2.4%, following a 3.4% surge in the fourth quarter of 2023 and a robust 4.9% growth rate in the previous period.
Consumer spending, which accounts for a significant portion of economic activity, increased by 2.5% during the quarter, a notable deceleration from the 3.3% gain seen in the previous quarter and falling below the Wall Street estimate of 3%.
Although fixed investment and state and local government spending contributed positively to GDP, a decline in private inventory investment and a surge in imports weighed on overall growth. Net exports subtracted 0.86 percentage points from the growth rate, while consumer spending contributed 1.68 percentage points.
In addition to weak growth, concerns about inflation heightened. The Personal Consumption Expenditures (PCE) price index, a crucial inflation gauge for the Federal Reserve, surged at an annualized pace of 3.4% for the quarter, marking its most substantial increase in a year and surpassing the previous quarter’s 1.8% gain. Excluding food and energy, core PCE prices rose at a 3.7% rate, significantly exceeding the Fed’s 2% target.
The GDP price index, also known as the “chain-weighted” level, rose at a 3.1% rate, slightly exceeding expectations for a 3% increase.
The disappointing GDP data led to a sharp market reaction, with Dow Jones Industrial Average futures plummeting more than 400 points. Treasury yields moved higher, with the benchmark 10-year note reaching 4.69%.
Investors are closely monitoring the Federal Reserve’s monetary policy stance and speculating on the timing of interest rate cuts. While futures trading previously indicated rate reductions starting in September, the weak economic growth and heightened inflationary pressures may prompt the Fed to adopt a more hawkish tone. This has led traders to adjust their expectations, with some now predicting only one rate cut in 2024.
Despite the challenging economic backdrop, the labor market remains resilient, with initial jobless claims totaling 207,000 for the week ending April 20, down 5,000 from the previous week and below the 215,000 estimate.
The housing market also showed signs of strength, with residential investment surging 13.9%, its most substantial increase since the fourth quarter of 2020.
While the initial GDP reading for the first quarter can be subject to significant revisions, economists are closely monitoring economic indicators for further insights into the trajectory of U.S. economic growth and inflationary pressures.
USD: Anticipated: Moderate US Growth, Rising Inflation in Q1
US Q1 GDP data came at 1.6% QoQ versus 2.5% expected and 3.4% printed in the Q4 2023. This data shows deceleration in the consumer spending, exports, Local and state Governments, FED also lower its spending after the rate hikes. But this downturn is offset by residential Fixed investments and imports. GDP Price index rose to 3.1% in Q1 from 1.7% printed in the last quarter.
USD Index Market Price is moving in Ascending channel and market has reached higher low area of the channel
US Dollar moved higher after the data printed in strong numbers.
Expected: Moderate US Growth, Accelerating Inflation in Q1
In the first quarter of the year, the U.S. economy is anticipated to have experienced a slower yet robust pace of growth, accompanied by a noticeable uptick in inflation, as per the report released by the Commerce Department on Thursday. This data reaffirms the prevailing market sentiment that the Federal Reserve will likely postpone any interest rate cuts until September.
Despite the anticipation of a slowdown, the U.S. economy has remained resilient, with consumers playing a pivotal role in driving economic activity, supported by a strong labor market. Contrary to previous concerns, the economy has continued to outperform expectations, defying initial predictions following the Federal Reserve’s aggressive measures to curb inflation.
A key contributing factor to this resilience is the lower mortgage rates secured by consumers, alongside businesses refinancing debt before the onset of the tightening cycle. Moreover, companies have bolstered their workforce, benefiting from favorable labor market conditions and robust pricing power, leading to higher profit margins.
Estimates suggest that gross domestic product (GDP) likely expanded at an annualized rate of 2.4% in the first quarter, with the economy demonstrating growth above the non-inflationary threshold identified by the Federal Reserve. The International Monetary Fund (IMF) recently upgraded its growth forecast for the U.S. economy for 2024, citing stronger-than-expected employment and consumer spending.
The resilience of the labor market is further underscored by data from the Labor Department, indicating weekly jobless claims holding steady at relatively low levels, indicative of minimal layoffs and sustained wage growth. These factors have contributed to robust consumer spending, a significant driver of economic activity.
However, while inflationary pressures are expected to have intensified during the first quarter, economists remain cautious about a sustained resurgence in price levels. The core Personal Consumption Expenditures (PCE) price index, closely monitored by the Federal Reserve, is projected to have increased at a rate of 3.4%, surpassing the previous quarter’s pace.
Despite the inflationary concerns, the expectation of rate cuts by the Federal Reserve persists, reflecting the prevailing economic conditions. Economists emphasize the importance of sustained wage growth to mitigate inflationary pressures, although recent indicators suggest weakening labor demand and cost indicators.
While consumer spending is expected to have remained robust, concerns linger regarding lower-income households relying on debt rather than savings to fund purchases. Additionally, the housing market is anticipated to have provided support to the economy, with substantial growth expected in residential investment.
Overall, while the U.S. economy demonstrates resilience, caution prevails among economists regarding the divergence between economic data and sentiment surveys. Nevertheless, businesses continue to navigate uncertainties, adapting to prevailing economic conditions and cautiously assessing future prospects.
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