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Expect the market to move on Thursday, after the release of the second reading of US GDP for Q2. Expansion is expected to be revised up to 4.1%, which is the best growth rate since Q1 in 2006. This comes at a time when the US economy could stand the encouragement, as it may help to weather the storm of the subprime mortgage industry implosion. Barring a huge unexpected revision, however, the markets may still be limited by the impact. Personal consumption is another factor that traders will be watching. The personal consumption rate is estimated to be revised from 1.3% to 1.5%. This is the weakest rate since Q4 in 2005, and an extreme slow down from the first quarter’s 3.7%.
Given that consumer confidence has taken a hit, concerns have been made that any spending will slow down even further, and may damage the already fragile economy in the coming quarters. It has been noted recently by the Federal Reserve that “financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward”. Combined with the FOMC’s statement that it’s prepared to act if needed, to mitigate the adverse effects on the economy that may arise from any disruptions in the financial market, traders are very speculative of a rate cut come September 18th. Activity in the financial market may certainly have more of a leverage on this decision than the GDP Q2 release, a smaller growth reading will certainly not help the case of hawks from the FOMC.
22:21
Posted on Aug-30-2007
