US GDP Contracts in Q4 By Most in Over 26 Years, Slightly Better Than Forecasts

Daily Forex Fundamentals | Written by DailyFX | Jan 30 09 14:25 GMT |

According to advanced reports, the US economy contracted in Q4 by the most since Q1 1982 at a rate of 3.8 percent, marking the second consecutive quarter of contraction. This was actually a bit better than forecasts, as a Bloomberg News poll shows that economists had expected a decline of 5.5 percent. All told, US real GDP for 2008 slowed to a 1.3 percent pace of growth, the lowest since 2001. This helps to explain the mixed reactions from the markets, as US stock market futures surged at 8:30 ET, immediately pulled back, and then slowly climbed into positive territory by 9:00 ET. The same goes for the USD/JPY, and the impact of this report on risk sentiment will be crucial to where the forex markets go next. As it stands, USD/JPY seems more likely to fall toward the bottom of its recent range at 89.00, suggesting other "risky" assets could decline as well. Source: FXTrek Intellicharts Focusing back on the data, the decline in GDP could be attributed to a variety of factors, including a 3.5 percent drop in personal consumption, a 12.3 percent decline in gross private investment, and a 19.7 percent plunge in exports. We already know that the US has been in recession since December 2007, per the National Bureau of Economic Research (NBER), but one of the bigger questions now is how long the recession will last for. It will be important to watch gauges of employment and business activity for the early months of 2009, as the latest trends suggest that GDP could continue to fall sharply in Q1 and Q2. Also worth keeping in mind that today's GDP report is simply the advanced reading, and with two more revisions due out on February 27 (preliminary) and March 26 (final), these figures could ultimately change dramatically. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.