GDP came in at a lackluster 2.6% for the 4th Quarter, missing expectations of a 2.9% growth rate. Markets did not react as you would expect, but why?
GDP was expected to be a strong 2.9% for the 4th Quarter–rounding out a year of accelerating growth. Instead we got 2.6% growth which is still an acceleration, but not at the pace expected.
When we dig into what dragged GDP down in the 4th Quarter, we find that a falling dollar increased the trade deficit which in turn hurt GDP. Inventories fell over the quarter, but that should actually be helpful to a typically weak 1st Quarter as they rebuild.
The real story was that the consumer was strong during the quarter, increasing consumption 3.8% year over year. This is extremely meaningful as the consumer makes up 70% of GDP and is responsible for much of the 2.6% increase. As a result, the markets continued their climb on the “lackluster” report.
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.