A Forex View From Afar

A Trader's Look At A Trader's Life

Forex Analysis

The Story Of The First Quarter GDP

Written by A Forex View From Afar on Thursday, April 30, 2009

The GDP report revealed a story of two tales, one in which consumers are the main character and has a happy ending and another where businesses came to the spotlight, but does not have the same happy ending.

The quarterly data showed a surprising 2.2% up-tick in consumer spending, something that indicates that consumer expenditures, which account for two thirds of the economy, remain resilient. At the same time, inventories dropped at a record $103.7 billion annual rate last quarter, which had a major negative influence over the nominal GDP numbers.

“If we take into account that consumer spending rose in the first quarter despite the tight credit conditions, and that business’ shed almost all the available stocks, we may see some positive surprises in the second quarter” TheLFB-Forex.com Trade Team said.

However, despite all the recent positive news, the economy kept contracting at a very strong pace making the current recession the worst in the last half of century. The business side of the economy shows a rather weaker picture, the GDP report points out.

“Business fixed investments plunged 37.8% in the first quarter, the most on record, while nonresidential and residential construction saw a double-digit plunge. Moreover, companies cut expenses on equipment, software and construction projects at a 38% annualized rate,” TheLFB-Forex.com Trade Team said.

“These numbers show the weakness of the corporate environment, which is struggling to survive,” TheLFB-Forex.com Trade Team noted. “Most likely, corporate bankruptcies are heading toward a record this year,” they said.

The GDP numbers are still weak, and do not show a substantial improvement from the previous quarter. However, the financial markets focused mainly on the unexpected rise in consumer spending. It will be interesting to see how spending will evolve in the coming period, giving that unemployment is still rising at a very fast rate, credit markets are still tight and most importantly, the U.S. savings rate is at very low levels.

Related Posts by Categories

  1. 0 comments: Responses to “ The Story Of The First Quarter GDP ”

TheLFB Team & The View From Afar Blog

© 2008 A Forex View From a far Trading Blog

Trade Desk View

Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

Want to subscribe?

Subscribe in a reader.