US GDP growth in Q4

 

US GDP growth in Q4 is revised to 2.1% p.a. from 2.1% p.a., preliminary estimate Forex market news
The U.S. economy continued to grow moderately in the 4th quarter of last year, but the key investment indicator for companies declined more than initially estimated. This is evidenced by the refined data published by the Department of Commerce on Thursday.

Gross Domestic Product, a broad measure of goods and services produced, rose by 2.1% p.a. in the 4th quarter, seasonally adjusted, and inflation, as shown by the first estimate. Economists surveyed by WSJ also expected that the second estimate would coincide with the first one.

Economic growth in the period from October to December corresponded to the growth of 2.1% observed in the 3rd quarter.

Non-residents' investments in fixed income assets, which reflects companies' spending on hardware and software, among other things, fell by 2.3% in Q4, which is significantly different from the first estimate -1.5%. U.S.-China trade tensions put pressure on investments for most of the 2-19 years, but a separate report from the Department of Commerce on Thursday showed that a recent Phase 1 trade agreement may have supported companies' expenditures in Q1. New orders for non-defence capital goods excluding aircraft rose by 1.1% in January after declining by 0.5% in December.

Meanwhile, refined data showed that investment in private inventories put less pressure on GDP growth than originally estimated.

Compared to the 4th quarter of 2018, GDP grew by 2.3%, as shown by the first estimate. Although annual economic growth in 2019 was the weakest since 2-16, it is in line with the average growth rate of the continuing decade.

Economists expect moderate growth in the U.S. economy in 2020, although the coronavirus outbreak recently overshadowed the outlook for the world economy at least in the 1st quarter of this year. The virus has erupted in China, and infection cases in other countries have increased in recent days. The Centers for Disease Control and Prevention reported Tuesday that they expect the virus to spread to the United States.

As part of efforts to curb the spread of the virus in China, production has been halted and tens of millions of people quarantined. The measures have disrupted the supply chains of companies that depend on production in China and have also reduced attendance at Chinese stores. Companies including Apple Inc., Procter Gamble Co. have warned that the impact of the virus could affect their financial performance. World stock markets fell this week due to concerns about the coronavirus, and investors began to prefer shelter assets, including gold and government bonds.

Fed managers said they are watching the situation around the coronavirus, but it is too early to assess whether the consequences of the virus will force the Fed to resume lowering the key interest rate.

The epidemic in China "could spread to the entire world economy," Fed Vice Chairman Richard Clarida said on Tuesday. "But it's too early to even talk about the extent or sustainability of these effects, or whether they will significantly alter the outlook.

U.S. business activity fell to its lowest level in more than 6 years in February, partly due to concerns about coronavirus, as preliminary data from HIS Markit last week showed. Markit and the Institute for Supply Management (ISM) will publish their Supply Chain Management Indexes for February next week, providing an early indication of business sentiment in recent months.

Meanwhile, before the coronavirus spread this month, the data signaled that the U.S. economy is still firmly on its feet. The unemployment rate in January was 3.6%, remaining around a 50-year low as more Americans joined the workforce. The data on consumer sentiment since the beginning of February showed that the Americans are still optimistic about the future economic conditions.

Strong labor market data and positive consumer sentiment last year contributed to higher spending in stores. Consumer spending, which accounts for more than two-thirds of GDP, provided important support to the economy in 2019, although its growth in Q4 was revised to 1.7% from 1.8%. Thus, spending in Q4 slowed down compared to Q2 and Q3.

On Friday, the Ministry of Commerce will publish data on household spending in January, shedding light on consumer spending for the expired period of 2020.