Economic Activity in the U.S. Slows to 2.4 Percent in the Second Quarter
Posted 07-30-2010 at 10:59 AM by DailyFX
Real GDP in the world’s largest economy expanded 2.4 percent in the second quarter after climbing a revised 3.7 percent the quarter prior amid economists’ forecasts of 2.6 percent. Going forward, we may continue to see weak growth in the U.S. as stimulus measures begin to fade. Immediately following the disappointing data, the USD/JPY tumbled from 86.44 to an intraday low of 85.95, and the southern journey may continue going into the North American trade on the back of risk aversion.
Meanwhile, the Federal Reserve’s preferred measure of inflation measure; the core PCE deflator added 1.1 percent in the second quarter, which is slightly lower than figures the quarter prior which gained 1.2 percent. Indeed, inventories continue to account for massive share of growth, and in fact, inventories may remain low over the medium term as companies continue to maintain an uncertain outlook. Today’s figures do not come to much of a surprise as Federal Chairman Ben Bernanke recently signaled that no moves were imminent to bolster the economic recovery despite a “somewhat weaker outlook,” while Senator Dodd added that “it looks like our economy is in need of additional help.”
Looking ahead, market participants will now shift their focus to the Chicago purchasing managers’ index for the month of July, while the final reading from the University of Michigan consumer sentiment is expected to rise to 67.0 from 66.5 the reading prior.
usdgdp
Market Reaction
Immediately following the disappointing data the USD/JPY fell from a high 86.44 to a low of 85.95. Indeed, the intraday low marks the lowest level since November 30th 2009. Going forward, we may continue to see the U.S. dollar lose ground against the Japanese Yen as our speculative sentiment index now stands at an extreme level of 5.507, signaling for further declines.
Meanwhile, the Federal Reserve’s preferred measure of inflation measure; the core PCE deflator added 1.1 percent in the second quarter, which is slightly lower than figures the quarter prior which gained 1.2 percent. Indeed, inventories continue to account for massive share of growth, and in fact, inventories may remain low over the medium term as companies continue to maintain an uncertain outlook. Today’s figures do not come to much of a surprise as Federal Chairman Ben Bernanke recently signaled that no moves were imminent to bolster the economic recovery despite a “somewhat weaker outlook,” while Senator Dodd added that “it looks like our economy is in need of additional help.”
Looking ahead, market participants will now shift their focus to the Chicago purchasing managers’ index for the month of July, while the final reading from the University of Michigan consumer sentiment is expected to rise to 67.0 from 66.5 the reading prior.
usdgdp
Market Reaction
Immediately following the disappointing data the USD/JPY fell from a high 86.44 to a low of 85.95. Indeed, the intraday low marks the lowest level since November 30th 2009. Going forward, we may continue to see the U.S. dollar lose ground against the Japanese Yen as our speculative sentiment index now stands at an extreme level of 5.507, signaling for further declines.
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