Increase in productivity of American economy risen to 4.0% during the second quarter, аnd its considerable decline to (-2.9%) during the first quarter has been reconsidered to growth to (-2.1%), according to the latest data, published by US Department of Commerce.
On July 30 US Dollar Index, which shows the power of US dollar exchange rate against the basket of 6 major currencies, rose by 0.36%. The analytics team of “FIBO-Group” broker company have given the readers of the “Market Leader” Internet edition five main conclusions from the report on US gross domestic product, the major factor in production of goods and services in American economy.
5 Conclusions from Today’s Report on GDP
Spring snowbreak. Today’s preliminary data on US gross domestic product (GDP) during the second quarter has shown considerable growth of consumer expenditures on durable goods, such as cars and household appliances. Expenditures on durable goods are around their maximal value for 5 years. Consumers have probably started to spend more after winter calm. Expenditures on public commodities have risen to the highest value as a part of GDP since the end of 2010. Business-investments, or capital expenditures, have risen by 5.5% in the second quarter after their growth by 1.6% in the first quarter.
Growth of Construction. Housing construction has brought its positive input into economic activity in the second quarter. Investments in housing stock have amounted to 0.23% of GDP after its decline during previous two quarters. Construction, which has stopped draging down US economy in 2011, has slightly risen in 2012 and continued weak growth for the most of 2013. Decreased activity, which started last autumn, in fact happened not due to slowdown of construction, but due to decline of broker’s commission fee from sale of real estate at secondary housing market.
Change of Economic Trend. In the second quarter considerable growth of GDP, which compensates for decline in the first quarter, looks much better taking into consideration the fact that economic growth is most rapid since 2003. These data has been recently published by US Department of Commerce. Annual growth of GDP in the third and forth quarters has amounted to 4.5% and 3.5% accordingly, in comparison to previous assessments of 4.1% and 2.6%. Assessment of slowdown in economic growth in the first quarter has also been reconsidered from -2.9% to -2.1%.
Attention to FRS. The latest data on GDP will probably not have immediate influence on representatives of US Federal Reserve System (FRS), for their two-day meeting finished only yesterday. US Central Bank is expected to reduce monthly purchase of bonds for another 10 billion dollars. However, the FRS forecast on economic growth in June has amounted to 2.1-2.3% and was not supposed to exceed 3.0%. However, in fact, economy has risen by 4.0% in the 2nd quarter. Wednesday report has also shown that inflation has exceeded the target level of 2.0% during the second quarter. According to preliminary data, the growth of personal consumption spending index has amounted to 2.3% in the second quarter.
In comments to the Wall Street Journal an economist from Lindsey Group's has written that FRS is absolutely detached from reality, as data on inflation has exceeded the key level, there is considerable improvement of the situation at labour market, and economic growth is much stronger than forecast.
Government Expenditures Contribute to Economic Growth. Government expenditures in the second quarter have become positive after a rapid decline at the end of last year after standby time in work of the government. Government expenditures were negative in the first quarter. In second quarter budgetary expenditures have risen by 1.6%, having thus exceeded the results of the first quarter by 3.1% and having brought profit into economy. Input of local budgets into growth of GDP has amounted to 0.35%, having reached a 5-year maximum.
Growth of dollar exchange rate has been supported by growth of profitability of 10-year treasury bonds. The chart below shows price drop of 10-year treasury bonds, which has lead to growth of their profitability from 2.46% to 2.51%.
Reaction of US Dollar Index to Unexpectedly Strong Growth of US GDP
The chart shows that the exchange rate of dollar has fulfilled all mid-term purposes of latest forecast of Masterforex-V Academy. US Dollar Index has exceeded the maximum of 2014, having broken the level around 81.47, shown on the chart by a dashed red line, thus setting a new maximum of 2014 around 81.55. The American session will later announce decisions on interest rates from US FRS and probable comments of the head of FRS J. Yellen. If they are positive, growth of US dollar exchange rate can continue within the range of 81.74 and 81.97.
If the head of FRS does not support the rapid growth of US dollar exchange rate after announcement of data on GDP, the exchange rate of dollar against other 6 currencies at Forex may undergo correction, namely, within the ranger of 81.47 and 81.26.
When US dollar exchange rate has broken the maximum of 2014, it has passed a wide range of consolidation. Prevailing uptrend, as well as its perspectives of growth, is shown by a blue arrow on the chart of US Dollar Index. Probable correction is shown by a red arrow.
