By: Hillel Fuld
The US economy did return to growth in Q3, bringing a formal end to the US recession (well, at least for the time being), but the figures were lower than first believed. The initial figures suggested that the annualised growth rate, based on Q3 data, was a healthy 3.5%, but revised figures put the growth at 2.8%. The culprit for this was that US imports were higher than had been thought in Q3. Initially, these had been estimated at 16% in the GDP calculations, but in reality, the figure was 21% (annualised data). This is the highest figure for imports since Q2 in 1985. Q3 2009 contained the highly successful “cash for clunkers” scheme in the US which saw government incentives to encourage people to get rid of old, polluting, fuel-inefficient vehicles and buy new cars. It is my guess that a substantial part of the additional import activity will be due to the purchase of vehicles made overseas. The Dow was down by 0.2% on the news; so it doesn’t look as if the market was much troubled by it.
US consumer confidence (unsurprisingly) is not strong. Although data released yesterday showed that the consumer confidence index had risen, the mood of consumers was found to be pessimistic and frugal. With US unemployment at its highest rate in 26% and predicted to rise further before the recovery gathers strength and generates new jobs, this is hardly a staggering revelation. Christmas expenditure in much of the developed world looks likely to be subdued this year. This may mean that merchants cut their profit margins and offer some tempting bargains in the hope of parting the consumer from his hard-earned cash.
US Economic Growth Data Weaker Than Believed
DailyForex.com