U.S. real gross domestic product (GDP) expanded at an annualized rate of 3.3% in the fourth quarter, the first estimates from the U.S. Bureau of Economic Analysis (BEA) showed on Thursday. This figure follows the 4.9% growth recorded in the third quarter and exceeded market expectations of 2%.
Follow our live coverage of US GDP announcements and market reactions.
“The increase in real GDP reflects increases in consumer spending, exports, state and local government spending, nonresidential capital investment, federal government spending, private inventory investment, and residential capital investment,” BEA noted in a press release. . “Imports, which are deducted from GDP calculations, have increased.”
Other details in the report showed the gross domestic product price index was 1.5% in the fourth quarter, down from 3.3% in the third quarter. Finally, the core personal consumption expenditures (PCE) price index rose 2% on a quarterly basis, consistent with the previous quarter’s rate of increase and market expectations.
Market reaction to US GDP data
The U.S. dollar index rose slightly in immediate reaction, but quickly erased any gains. At the time of writing, the US dollar index was down 0.05% on the day at 103.15.
USD price this week
The table below shows the percentage change of the US dollar (USD) against major currencies this week. The US dollar was the weakest against the Japanese yen.
USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
USD | 0.01% | -0.24% | 0.48% | -0.02% | -0.43% | -0.13% | -0.42% | |
EUR | 0.05% | -0.25% | 0.47% | -0.03% | -0.43% | -0.13% | -0.42% | |
GBP | 0.24% | 0.25% | 0.71% | 0.23% | -0.18% | 0.13% | -0.18% | |
CAD | -0.48% | -0.46% | -0.72% | -0.49% | -0.90% | -0.58% | -0.89% | |
australian dollar | 0.02% | 0.03% | -0.22% | 0.41% | -0.41% | -0.10% | -0.39% | |
JPY | 0.42% | 0.43% | 0.22% | 0.89% | 0.41% | 0.32% | 0.00% | |
new zealand dollar | 0.12% | 0.12% | -0.13% | 0.58% | 0.10% | -0.33% | -0.29% | |
Swiss franc | 0.42% | 0.42% | 0.18% | 0.89% | 0.39% | -0.02% | 0.29% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
This section below was published as a preview of U.S. gross domestic product (GDP) data at 8 a.m. Japan time.
- U.S. gross domestic product is projected to grow at an annual rate of 2% in the fourth quarter.
- The resilience of the US economy could cause the Fed to delay policy change.
- Investors will also pay close attention to the figures for the domestic gross price deflator.
The U.S. economy is expected to expand at an annual rate of 2%, following an impressive 4.9% annual growth rate, the Bureau of Economic Analysis (BEA) releases Thursday in its fourth quarter gross domestic product (GDP) report. . Growth rate recorded in the previous quarter.
After being exposed to sustained bearish pressure in the last quarter of 2023, the US dollar (USD) managed to rebound in January. The DXY USD index is up nearly 2% year-to-date as markets reassess the timing of the Federal Reserve’s policy change.
U.S. gross domestic product forecast: What the numbers tell us
In Thursday’s U.S. economic data, the focus is on the release of preliminary fourth quarter GDP figures scheduled for 1:30 p.m. Japan time. Initial estimates show the world’s largest economy grew by 2% in the past three months of 2023, well below the 4.9% growth in the third quarter, but at a relatively healthy pace. It is expected.
Inventory accumulation was the main driver of GDP growth in the third quarter. This component tends to move in the opposite direction from quarter to quarter, so it wouldn’t be a big surprise if the expansion rate drops sharply toward the end of 2023.
Market participants will also pay close attention to measurements of the GDP price deflator (also known as the GDP price index), which measures changes in the prices of services and goods produced in the United States. The GDP price deflator rose to 3.3% in the third quarter from 1.7% in the second quarter, suggesting that inflation had a larger positive impact on growth than in the second quarter.
Previewing US GDP growth data, he said: “From an economic output perspective, we expect real GDP in 23Q4 to record a below-trend 1.6% QoQ AR expansion, which is a big hit in the third quarter.” “This is much slower than the unsustainable 4.9% increase,” TD Securities analysts said. he said and continued.
“In detail, we believe that consumer spending led the slowdown in activity (although it is likely still growing at a reasonable pace), but we expect inventories to be a major drag. We expect capex to remain weak, as capex appears to remain mostly depressed in the fourth quarter (capex has contracted in five of the past six quarters). Even if the lower forecast materializes, production could still grow at a very high pace of 2.4% in 2023 (2.7% in Q4/Q4).”
When will the GDP print release be released and what impact could it have on the USD?
The US GDP report will be released on Thursday at 1:30pm Japan time. Ahead of the event, the U.S. dollar has remained resilient against rival markets on rising expectations that the U.S. Federal Reserve will delay further interest rate cuts.
Before the Fed’s blackout period began on Jan. 21, several policymakers bucked market expectations that the Fed would cut interest rates by 25 basis points (bps) in March. San Francisco Fed President Mary Daly said she believes the central bank has a lot of work left to do to bring inflation back to the Fed’s 2% goal, saying, “A rate cut is on the horizon.” “It is too early to think so,” he said. Similarly, Atlanta Fed President Rafael Bostic said his base case is for interest rate cuts to begin in the third quarter.
The CME Fedwatch tool’s probability of a 25 basis point rate cut in March fell from nearly 80% in late December to less than 50% in late January, reflecting changes in market positioning.
A better-than-expected fourth-quarter GDP growth could raise expectations that the Fed is likely to refrain from lowering interest rates in March and react immediately to push the dollar higher. If GDP measurements move closer to the market consensus of 2%, a GDP price deflator above 3% could help keep the USD grounded, but a decline towards 2% could negatively impact the currency. There is a gender.
On the other hand, a disappointing growth rate below 1.5% could contradict the “soft landing” narrative. In this scenario, the market could lean toward the Fed’s rate cut in March, triggering a fall in U.S. Treasury yields and incurring losses for the U.S. dollar against its main rival.
Ellen Sengeser, FXStreet’s European Session Lead Analyst, provides a brief technical outlook for the USD Index (DXY).
“The Relative Strength Index (RSI) indicator on the daily chart remains near 60, highlighting a short-term bullish bias. The 200-day simple moving average (SMA) forms a pivot point at 103.50. If DXY stabilizes above that level and starts using it as support, 104.40 (100-day SMA) and 105.00 (psychological level) could be set as the next bullish targets. The October-December downtrend Fibonacci 38.2% retracement forms strong support at 103.00 before 102.50 (20-day SMA) and 102.00 (Fibonacci 23.6% retracement).”
GDP FAQ
A country’s gross domestic product (GDP) measures the growth rate of the economy over a period of time (usually a quarter). The most reliable numbers are those that compare GDP with the previous quarter (e.g. Q2 2023 vs. Q1 2023) or with the same period in the previous year (e.g. Q2 2023 and the second quarter of 2022).
Annualized quarterly GDP numbers estimate the growth rate for that quarter as if it were constant for the rest of the year. However, if a temporary shock affects growth in some quarters but is unlikely to persist throughout the year, as in the first quarter of 2020 when the coronavirus pandemic hit and growth plummeted. may be misleading.
A rise in GDP is generally positive for a country’s currency as it reflects a growing economy, is more likely to produce exportable goods and services, and is more likely to attract more foreign investment. . Similarly, a decline in GDP is usually negative for a currency.
When the economy grows, people tend to spend more, which leads to inflation. The country’s central bank would then have to raise interest rates to combat inflation, but the side effect would be increased capital inflows from global investors, helping the local currency appreciate.
When the economy grows and GDP rises, people tend to spend more, which leads to inflation. In that case, the country’s central bank would have to raise interest rates to combat inflation. Rising interest rates are negative for gold because it increases the opportunity cost of holding gold compared to keeping it in a cash savings account. Therefore, an increase in GDP growth is usually a bearish factor for gold prices.