26 Jun 2014
US GDP drop exaggerated? - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, sees yesterday's US GDP figures as exaggerated.
Key Quotes
"The US dollar has remained on the defensive in the Asian trading session after weakening modestly following the release yesterday of the weaker than expected US GDP report for Q1. The report revealed that the US economy contracted even more sharply than expected by an annualized rate of 2.9% in Q1."
"It was the largest respective downward revision on record and was mainly driven by a downgrade to health care spending and a larger than initially estimated drag on growth from net trade. The positive contribution from services consumption was reduced by 1.26 percentage points and the drag on growth from net trade was increased by 0.58 percentage points."
"It represents an unusually large quarterly contraction in US economic activity outside of a recessionary period. A number of negative temporary factors including the unusually harsh winter, late timing of Easter, and large inventory drawdown have combined to result in the sharp economic contraction."
"The report likely exaggerates the scale of weakness in the US economy. It was reassuring that the US economy still added an average of 190k jobs/month during Q1, when in the last four quarters that the economy contracted as sharply it was shedding jobs."
"Further reassuring evidence was also released yesterday signalling that the US economy is rebounding strongly in Q2. The US composite PMI survey increased by 2.7 point to 61.1 in June, which Markit noted was not just a rebound from the weather-related disruptions to business earlier this year, and sets the scene for further robust economic growth moving into the second half of the year."
Key Quotes
"The US dollar has remained on the defensive in the Asian trading session after weakening modestly following the release yesterday of the weaker than expected US GDP report for Q1. The report revealed that the US economy contracted even more sharply than expected by an annualized rate of 2.9% in Q1."
"It was the largest respective downward revision on record and was mainly driven by a downgrade to health care spending and a larger than initially estimated drag on growth from net trade. The positive contribution from services consumption was reduced by 1.26 percentage points and the drag on growth from net trade was increased by 0.58 percentage points."
"It represents an unusually large quarterly contraction in US economic activity outside of a recessionary period. A number of negative temporary factors including the unusually harsh winter, late timing of Easter, and large inventory drawdown have combined to result in the sharp economic contraction."
"The report likely exaggerates the scale of weakness in the US economy. It was reassuring that the US economy still added an average of 190k jobs/month during Q1, when in the last four quarters that the economy contracted as sharply it was shedding jobs."
"Further reassuring evidence was also released yesterday signalling that the US economy is rebounding strongly in Q2. The US composite PMI survey increased by 2.7 point to 61.1 in June, which Markit noted was not just a rebound from the weather-related disruptions to business earlier this year, and sets the scene for further robust economic growth moving into the second half of the year."