U.S. GDP is Below Estimates

[jonydeb]

U.S. Gross Domestic Product increased 2.8% from July to September, below the 3.5% increase previously estimated by the government, according to preliminary figures by the U.S. Commerce Department. The decrease was due to downward revisions in consumer spending and business investment in nonresidential structures, as well as changes to imports and exports.

After the release of U.S. GDP, USD/JPY decline from Monday’s high at 89.20 has extended below 88.55 support, and the Dollar has dipped to 88.35, its lowest level since early October. Dollar and Yen have edged up against major rivals.

EUR/USD which had extended recovery from 1.4880 session low to intra-day high at 1.4985 right ahead of GDP data release, has pulled down to 1.4960 after the weaker than expected reading. While GBP/USD had bounced from 1.6495 session low, to reach 1.6590 moments ahead of the GDP, to pull down to 1.6560 minutes also after U.S. data.

According to the GDP report, massive job cuts by businesses are paying off for them. Corporate profits increased at a 10.6% quarterly rate, the fastest rate since 2004. In the prior quarter, profits rose at a 3.7% rate.

Growth in the third quarter was the strongest in two years, the government said. Before growing in the June-to-September quarter, the U.S. economy had shrunk for four straight quarters for the first time since the Great Depression.

The economy shrank at a 0.7% annualized rate in the second quarter and at a 6.4% pace in the first quarter. The figures are seasonally adjusted and adjusted for price changes. Third-quarter growth was due to higher consumer spending and robust government spending, among other factors