The world’s leading economy released its preliminary reading for the fourth quarter 2009, GDP report showing a strong growth rate of 5.9 percent coming in higher than the previous and the expected 5.7 percent due to the rise in manufacturing activities in the U.S that helped boost and support growth in the U.S over the past period along with the improvement in overall economical conditions around the U.S.
The GDP price index managed to rise below the previous reported estimate and the expected by markets of 0.6% as it reached 0.4%, meanwhile personal consumption rose by 1.7% as seen in the report, coming in below the pervious and the expected 2.0%, meanwhile the Core PCE rose above the previous and the expected estimate of 1.4% as it reached 1.6% in the fourth quarter of 2009.
The rise in economical activities over the past period came due strong investments along with the support the economy obtained from the manufacturing sector, thus marking the best performance in more than six years, another unexpected push for the GDP came from inventories as it added 3.88 percent point to the GDP.
The main sector that helped the economy as whole was the manufacturing sector as it emerged from the worst financial crisis in decades strongly and beat the worst financial conditions in the sector since the early 1980’s, but that rise was not due to the strong consumer demand but due to agitating goods from businesses as they continued to lower their inventory levels in order to cut cost and produce money but despite the decline in inventories over the past period, manufacturers will continue to support economic recovery as the improvement in demand helped companies to boost its production levels along with adding to the stockpiles.
Nevertheless, consumer spending that accounts for 70 percent of GDP will trim off growth in the upcoming period due to elevated unemployment levels along with tight credit conditions that still hammers down spending in the U.S as its making it harder for consumers to obtain new loans and expand their spending, nor for companies to expand their investments.
The jobless rate still stands at quarter century record highs of 9.7% as it was reported by the labor department in January, meanwhile expectations show that the 2010 fiscal year will end as unemployment still stands at 9.5%, moreover sub indices in the GDP report showed that gross private investments rose by 48.9 percent from the previous 39.3 percent, while exports rose by 22.4% from 18.1% and imports rose by 15.3% from 10.5%.
The economy still faces challenges in the upcoming period, where weak economic conditions, slumping demand, tight credit conditions, high unemployment, diminishing wealth and rising foreclosures will have its affects on this year and that would prevent the economy from continuing with its strong growth and will be revised down either in the final reading for the fourth quarter GDP reading, or in the first quarter of 2010.
The year 2010 is considered a recovery year, but expectations from the National Association of Business Economics showed that the world’s leading economy’s growth rate will not exceed 3.0% in the first quarter of this year, meanwhile it will preserve that range throughout the next two quarters therefore as we expected, the U.S economy will fail to maintain strong growth rates as conditions is still challenging and affecting growth by hammering down spending that accounts of 70% of GDP in the U.S.
Investors will feel optimistic today on these news while more news is still to come from the world’s leading economy, where the housing sector will release its existing home sales report along with the Uni. Of Michigan consumer confidence report that is expected to show a slight rise in the final February reading. Therefore a rise in stock markets will most probably dominate trading today as investors risk appetite will be stronger along with targeting high yielding assets, therefore the Dollar will weaken and commodities will rise, following the rise in stocks throughout today’s trading day.
