The U.S. economy contracted in the fourth quarter of 2008 by the most since 1982 according to the latest release by the U.S. Commerce Department. The preliminary estimate report released today showed that the U.S. Gross Domestic Product contracted at an annual rate of 6.2 percent in the October to December 2008 quarter. Today’s release surpasses the advance fourth quarter report that was released on January 30th and showed a 3.8 percent contraction.
The third quarter GDP fell by 0.5 percent while the second quarter GDP grew by a 2.8 percent. Today’s GDP numbers surpassed the 5.4 percent contraction that the economic forecasts were expecting for the fourth quarter.
Contributing largely to the decreased GDP for the fourth quarter was a second consecutive quarterly decline in consumer spending which makes up approximately two-thirds of U.S. economic activity. Consumer spending decreased by 4.3 percent in the fourth quarter after decreasing by 3.8 percent in the third quarter and produced the lowest reading since 1980.
Exports declined sharply from the third quarter as exports of goods and services decreased by 23.6 percent in the fourth quarter after increasing by 3.0 percent in the third quarter. Imports declined in the fourth quarter by 16.0 percent following a decline of 3.5 percent in the third quarter.
Forex Market – US Dollar falling after GDP report.
The U.S. dollar has been falling in forex trading following the worse than expected GDP release but has still shown gains for the day against most of the major currencies.
The euro is lower versus the dollar today as the EUR/USD has declined from today’s 1.2733 opening(00:00 GMT) to trading at approximately 1.2705 in the morning of the US trading session at 11:04pm EST according to currency data by Oanda. The euro is climbing back versus the dollar after reaching an intraday low of 1.2602.
The British pound has fallen so far today versus the American currency from the 1.4298 opening to trading at 1.4254 dollars per pound but is advancing higher after the GDP report. The dollar is trading virtually unchanged against the Japanese yen at the time of writing as the USD/JPY has gained slightly from its 97.61 opening to trading at 97.64 yen per usd. The dollar has gained against the Canadian dollar after opening at 1.2544 earlier today to trading later at 1.2681.
The USD is falling against the Swiss franc after opening at 1.1652 to trading at the 1.1624 exchange rate. The Australian dollar has lost ground as the AUD/USD has declined from 0.6454 to 0.6412 while the New Zealand dollar has fallen from 0.5062 usd per nzd to trading at 0.5028.
GBP/USD Chart – The British Pound surging higher against the US Dollar in Forex Trading after the release of the U.S. GDP report(Hourly Chart).