GDP: The US economy is in better shape than expected

The euro fell sharply against the US dollar after the publication of a weak report on inflation in Germany, as well as data on US GDP growth, which were much better than economists’ forecasts, which returned hope to investors for a faster return to the growth rates of the American economy above 3.0%.

According to the report of the Federal Bureau of Statistics of Germany, inflation in Germany increased in February, but the data fully coincided with the forecasts of experts.

The increase was mainly due to upward pressure from energy and food prices.

Thus, the preliminary CPI in Germany in February 2019 increased by 0.5% compared with the previous month and 1.6% compared with the same period of the previous year. Economists had expected the index to grow by 0.5% in February compared with the previous month and by 1.5% compared with the same period of the previous year.

As noted above, the increase was due to the rise in prices for energy carriers, the prices of which rose in February by 2.9% compared with the same period of the previous year. Food prices increased by 1.5% compared with the same period last year.

As for the index harmonized by EU standards, in February, it increased by 0.5% compared with the previous month and by 1.7% compared with the same period of the previous year. Economists had expected the index to grow by 0.6%.

All traders’ attention in the afternoon was focused on the report on US GDP growth in the 4th quarter of 2018, which caused particular concern among investors. Despite the fact that the

year ended on a weak note, and GDP growth slowed, the data were much better than predicted.

According to the first estimate of the US Department of Commerce, the gross domestic product of the United States in the 4th quarter of 2018 increased by 2.6% per annum. Economists had forecast GDP growth of 2.2% in the 4th quarter. Let me remind you that back in the 3rd quarter, the US economy grew by 3.4%, and in the 2nd quarter by 4.2%.

The decline is associated with a slowdown in economic activity, as well as a decrease in consumer spending.

The number of Americans who first applied for unemployment benefits rose last week, but the change in weekly indicators poses no threat to the market as a whole. According to data from the US Department of Labor, the number of initial claims for unemployment benefits increased by 8,000 over the week from February 17 to 23 and amounted to 225,000. Economists had expected that the number of initial claims would be 220,000.

A speech in the second half of the day by the representative of the Fed Richard Clarida helped the US dollar to maintain an upward momentum against a number of world currencies.

Clarida said the US economy will continue to grow steadily in 2019, albeit at a slightly slower pace. Inflation is at the lower end of the range corresponding to the target level of 2%, as well as interest rates, which are in the range that corresponds to the assessment of the neutral level. As for the Fed’s balance sheet, then, in the opinion of the Fed representative, its final size will be determined by the demand for currency and reserves.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: GDP: The US economy is in better shape than expected

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