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US 3Q14 GDP surprises on the upside - 3.9% vs initial 3.5% print – ING

FXStreet (Barcelona) - Rob Carnell of ING notes 3Q14 US GDP was expected by most analysts to be revised slightly lower following its initial 3.5% release, and following slightly less supportive trade data released after the initial GDP number, but GDP has actually been revised higher to 3.9%.

Key Quotes

“Some of the factors supporting this upward revision are quite encouraging - for instance, the upwards revision to equipment and software spending (business investment, now 10.7% from 7.2% initially), and personal consumption (consumer spending now 2.2% from 1.8%), and residential investment (homebuilding - now 2.7% from 1.8%).”

“There was, as expected, a slight additional drag from the net export sector, worth about $20bn over the quarter (annualised rate). And this more than offset the further increase in inventory building (revised up about $16bn) over the same period.”

“Whilst some parts of this release do suggest that the US economy has more momentum than initially indicated, both inventories and the defence component of government spending are likely to revert to being considerable drags in the fourth quarter, taking GDP growth closer to 2.0% than 3.0%, and the profile for GDP will remain very choppy, masking an underlying growth rate of between 2.5% and 3.0%.”

“At the margin, these figures make it easier for the Fed to move towards pushing rates higher next year. But a lot can happen between now and the April 2015 rate hike the market is pricing in, including much weaker inflation and a possible re-run of the 2013 government shutdown, and we are taking nothing for granted.”

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