First quarter GDP in the US rose 2.2 per cent, coming in slightly under estimates for a 2.5 per cent increase and well below the 3 per cent recorded in the last quarter of 2011.
And with a little analysis (and a prayer for some euro-happiness), here is Deutsche Bank’s Alan Ruskin:
The Q1 GDP data was disappointing. The breakdown misses are large on both sides, with PCE much stronger than expected, and durables in particular healthy, while the investment data outside a surprisingly strong housing investment number was notably weak. Another large negative miss was federal govt spending.
Ultimately the business investment data largely trumped the pockets of strength elsewhere. The best measure of underlying domestic demand, the final sales to domestic purchasers at 1.6% is not terribly inspiring albeit up marginally from 1.1% in the prior qtr.
This is uninspired data, and will draw further attention to the Okun’s law and Bernanke’s remarks that GDP data is not nearly as buoyant as the labor market would suggest. The data is assessed to be marginally above the kind of numbers that the Fed will view as a minimum to allow them to extricate themselves from unorthodox monetary measures like Operation Twist. A sub 2% GDP trend could easily push them over the edge, and back into QE type measures, although the extent to which risk variables hold up is obviously crucial as well, while core PCE deflator at 2.1% is closer to the levels where it could start to limit their flexibility.
Equities have slipped slightly so far but are generally fairly resolute and I doubt this will be defining in turning the more constructive tone around. For the FX market, interesting to see the USD losing ground to the EUR even in the face of a minor risk negative move. EUR/USD has shown little propensity to go down on bad EUR news and the path of least resistance still feels like a stronger EUR, with the only thing that is absent a piece of genuinely decent EUR news to provide the spark!
Finally, two quite lovely charts from the always reliable @scottybarber over at Reuters, the first of which puts the table data above into a prettier format while the second suggests any gloominess can be assuaged by a bit of context: