GDP: Recession Arrives, Consumer Weakness Dominates

Daily Forex Fundamentals | Written by Wachovia Corporation | Oct 30 08 13:47 GMT |

Real GDP fell 0.3 percent in the third quarter of this year suggesting a recession has begun. Weakness was driven by consumer spending, down 3.1 percent, as higher gas prices, housing weakness and job losses created huge headwinds for the consumer. Business equipment spending declined while strength was added by exports and government spending. Weak Domestic Sales, Fundamentals Dominate Consumer spending fell 3.1 percent with durable goods declining 14 percent. Fundamentals—job declines and wealth loses in housing and financial assets—led to retrenchment. Business investment in equipment & software declined while structures spending slowed. Fundamentals dominated again; expected final sales fell, profits declined and credit was scarce. Inventories-Possible Upside Revision BEA officials assumed a large decline for inventories in September. This could be overstated which could result in an upward revision in GDP next month. Real final sales declined in the third quarter by 0.8 percent. This suggests underlying weakness in aggregate demand for the economy. Recession continues to be the outlook. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.