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Consumer Spending Falters, U.S. GDP Falls Short of Forecast

Consumer Spending Falters, U.S. GDP Falls Short of Forecast

2011-05-26 14:01:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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U.S. gross domestic product for the first quarter failed to meet analysts’ expectations, as consumer spending weighed in at a worst rate than originally anticipated. Worse-than-expected spending from consumers, who scaled back purchases of automobiles and utilities, led to the confirmation of the preliminary growth figure. According to a Bloomberg News survey, the aggregate growth figure was expected to come in at 2.2 percent, with the actual figure noting a 1.8 percent increase; the world’s largest economy grew at a 3.1 percent pace in the fourth quarter of 2010. As noted in April when the preliminary figure was released, “it is evident that higher energy and food costs are beginning to weigh on the American consumer, in spite of the fact that the Federal Reserve’s policymakers continue to deem the current inflationary state ‘transitory.’”

U.S. Gross Domestic Products: March 2005 to Present

052611_US_GDP_Fails_to_Meet_Expectations_body_Picture_1.png, Consumer Spending Falters, U.S. GDP Falls Short of Forecast

Courtesy: Bloomberg

After the release, which seemingly disappointed traders, the Dow Jones FXCM Dollar Index plummeted, falling from 9664.22 to as low as 9629.06. At the time this report was written, the index was still trading below 9630.00. The aggregate gross domestic product figure is historically market moving, but upon releases after the preliminary release, given that the figure is well-documented beforehand, tends to have little effect on investor sentiment thereafter.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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