Ouch ... 1.3% US GDP Growth in Q1
Uff, this is surely going to bring some ripples around the markets. Expect the Eur/USD to break all records and the bears to roar :). Definitely this must be considered a number on the downside and is fast approaching the dreaded sub 1% recession gauge. Is it over then with these Q1 figures? Well, I won't even begin to put my a** on the line with a prediction :). It does appear however that consumer spending stayed afloat and interestingly the trade deficit also widened so perhaps it is not as bad as it looks? Only time of course will tell and by time I mean whether this will extend into Q2 as well which will certainly mean that GDP growth goes below 1% or whether we will limp along status quo at about 1.5%?
The U.S. economy grew in the first quarter at the slowest pace in four years, hobbled by the slump in home construction and a bigger trade deficit.
The 1.3 percent annual growth rate was less than forecast and followed a 2.5 percent fourth-quarter pace, the Commerce Department reported today in Washington. A measure of inflation watched by the Federal Reserve rose at a faster pace.
Consumer spending kept the expansion alive as the slowdown in housing extended to a sixth quarter, the longest continuous slide in a generation. A burst of inflation last quarter will prevent Federal Reserve policy makers from lowering interest rates to stimulate growth, economists said.
``The Fed was correct in identifying the elevated downside risks to economy,'' Michael Gregory, a senior economist at BMO Nesbitt Burns in Toronto, said before the report. ``But they are prepared to wait it out.''
Last quarter's growth rate was the weakest since the first three months of 2003. Growth in the 12 months ended in March slowed to 2.1 percent, the weakest year-over-year gain since the second quarter of 2003.