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US Economy Grows at +0.4% in 4Q'12, Barely Missing Expectations

US Economy Grows at +0.4% in 4Q'12, Barely Missing Expectations

Christopher Vecchio, CFA, Senior Strategist

THE TAKEAWAY: USD GDP (Annualized) (4Q F) > +0.4% versus +0.5% expected, from +0.1% (initially -0.1%) > USDJPY BEARISH

The US economy grew at an annualized pace of +0.4% in the 4Q’2012, above the initially reported -0.1% when the first reading was released in January. However, the print was slightly below the +0.5% expected reading, leading to some slight selling pressure in the US Dollar. Even as defense spending plunged by an annualized pace of -22.1% in the 4Q’12, the smaller trade deficit at $384.7B – the smallest since 1Q’10 – helped boost the final release of the GDP figure.

Once again preventing further gains in the revision, however, was the softer than forecasted and softer than prior Personal Consumption figure. Consumer purchases rose by +1.8% at an annualized pace, down from +2.2% initially reported, and below the +2.1% reading as projected by consensus forecasts, according to a Bloomberg News survey. As was the case at the second revision, thefinal is not surprising, however; it was clearly signaled that taxes would be hiked in 2013 as part of some resolution to the US fiscal cliff/slope, thus denting consumption expectations and forcing a higher rate of savings. Consumption is the most important part of the US headline GDP figure, accounting for 72% of overall growth.

Also released at 08:30 EST/13:30 GMT was the weekly Initial Jobless Claims (MAR 23) print, which came in much worse than expected. The current rate of 357K suggests that the March Nonfarm Payrolls report, released on April 5, in conjunction with the prior claims readings, will show that the economy added somewhere between +185K and +210K jobs.

USDJPY 1-minute Chart: March 28, 2013

US_Economy_Grows_at_0.4_in_4Q12_Barely_Missing_Expectations_body_Picture_1.png, US Economy Grows at +0.4% in 4Q'12, Barely Missing Expectations

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the release, the USDJPY dipped from a pre-release level of 94.33, to as low as 94.17. However, at the time this article was written, the pair has rebounded to 94.24, as the data was not weak enough to spur greater selling pressure; in context of the first print, the final revision was +0.5% higher, thus showing a stronger economy, limiting downside pressure.

--- Written by Christopher Vecchio, Currency Analyst

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