The U.S. economy entered its third quarter of the year on a positive note, but recent data suggests that growth output could be mild and limited during the last six months of the year.
Gross domestic product (GDP), the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annualized rate of 3.9% for the second quarter, the Commerce Department reported on Friday. The agency had submitted a previous estimate of only 3.7% expansion in the economy, and other economists predicted it would be the same.
But, fresh data on consumer purchases from services helped to improve the second quarter reading. Friday’s data showed personal consumption grew at a 3.6% pace, which is up from the previously estimated rate of 3.1%.
Today’s US second quarter GDP figures also reveal positive news on the building and construction side. Residential construction expanded at a revised pace of 9.3% during the second quarter. Non-residential construction grew at a 6.2% rate, which is a sharp increase over the earlier 3.1% estimate.
But, despite the positive news from this Friday’s US GDP report, it also included hints of a possible pullback in growth during the third quarter. Private inventories trimmed off in the second quarter, suggesting that firms may start selling off products stocked on their shelves rather than manufacturing new ones. If this happens, this could temporarily push down the pace of growth.
But regardless of this news, the second quarter’s strong growth still represents a solid rebound after a sluggish first quarter that was weighed down by harsher weather conditions in the winter and labor strife at West Coast ports. The Commerce Department estimates output grew at an anemic 0.6% seasonally adjusted annual rate in the first quarter.
The strong US dollar has also made U.S. exports more expensive, which applies pressure on manufacturers and holds down their output.
Federal Reserve Chairwoman Janet Yellen said last week she expected “a moderate pace of overall GDP growth” this year “even though the restraint from net exports is likely to persist for a time.”
At the time the Final Second Quarter GDP numbers were released, EUR/USD pair fell to support at 1.1125, but has climbed to the 1.1174 level, which is slightly below the 100 Hour SMA at 1.1179. If price encounters resistance here, then we may see a continuation of the bearish trend, with approaching support at today’s current session low of 1.1116. On the contrary, if price breaks above the 100 HMA, it may attempt to test the 1.1200 psychological handle.
The Commerce Department’s release on GDP can be found at: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
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Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.