Downward Trend of GDP Continues!
Friday, July 30, 2010. 9:15 a.m.
The much anticipated 2nd quarter GDP report was just released, and was that GDP grew 2.4% in Q2, missing the consensus forecast of 2.5% by only a fraction. And GDP for the first quarter was revised up from the previously reported 2.7% to 3.7%.
So it was a mixed report that could be viewed as not that bad.
However, we need to look at the trend of the first half of this year to see the real story.
A few months ago the forecasts were for the economy to grow 4% in the 2nd quarter, which would have been an improvement over the 1st quarter. A month or so ago, as indications became clear that the economy was slowing sooner and faster than had been expected, the consensus forecast was revised down to 3% growth. And in the last week or two, as economic reports worsened further, the consensus forecast was revised down again, to just 2.5% growth. And the growth even missed that sharply lowered forecast.
So, the trend of the steady downward revisions of the Q2 forecasts; 4%, 3%, 2.5%, and then the report at 2.4%, confirms that the economy is slowing even faster than economists are able to revise their expectations downward.
The actual report numbers also show the trend, 5.6% in the December quarter, a now revised 3.7% in the March quarter, and now 2.4% in the June quarter.
And all along, the forecasts, not only from economists but from the Fed, have been that although the economy was originally expected to have improved to 4% growth in the 2nd quarter, it would slow in the second half of the year.
That the 2nd quarter did not show an improvement over the 1st quarter, as originally expected, and forecasts had to be lowered so significantly during the quarter, and still the growth came in lower, does not bode well for the extent of the expected second half slowdown.
Wall Street will be pushing the idea that Q2 growth only missed the consensus forecast by a fraction. But we believe the downward trend of the actual reports so far this year, and even more importantly how the Q2 forecasts had to be revised lower so rapidly as the quarter progressed, is the real story from the numbers.
Yesterday in the U.S. Market.
Volatility returned. The Dow spiked up 87 points in the first half hour, then plunged 197 points from that high until it was down 110 points. Then clawed its way back to being down only 30 points, or 0.3%.
Yesterday’s Intraday Chart.
The Dow closed down 30 points, or 0.3%. The S&P 500 closed down 0.4%. The NYSE Composite closed down 0.1%. The Nasdaq closed down 0.6%. The Russell 2000 closed down 0.1%. The DJ Transportation Avg. closed down 0.1%.
The dollar etf UUP closed down 0.7%. The treasury bond etf TLT closed down 0.1%. The gold etf GLD closed up 0.4%, bouncing back fractionally after its big plunge so far this week..
Yesterday in European Markets.
European markets also gave up earlier gains to close down. The London FTSE closed down 0.1%. The German DAX closed down 0.7%, and the France CAC closed down 0.5%.
Asian Markets Were Down Last Night.
Among individual markets:
Australia closed down 0.6%. China closed down 0.4%. Hong Kong closed down 0.3%. India closed down 0.7%. Indonesia closed down 0.9%. Japan closed down 1.6%. Malaysia closed up 0.1% New Zealand closed up 0.1%. Singapore closed down 0.3%. South Korea closed down 0.7%. Taiwan closed down 0.5%.
Markets This Morning.
European markets are also down this morning. At the moment London is down 0.9%. Germany is down 0.8%, and France is down 1.1%.
Oil is down $1.24 a barrel at 77.12.
Gold is up $3 an ounce at $1,171.
Markets In the U.S.
This fairly heavy week for potential market-moving economic reports continues, the reports including more related to the important housing industry; New Home Sales, and the Home Price Index, and Durable Goods Orders, Consumer Confidence, and the first estimate of 2nd quarter GDP. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.
Monday it was new home sales in June, which rose more than forecasts, but were still the 2nd lowest monthly level ever recorded. Tuesday it was the Housing Price Index, which showed home prices rose an average of 1.3% in May. But the Conference Board’s Consumer Confidence report was a big disappointment, declining further in July to 50.4 from 54.3 in June, which followed the big drop of 10 points from 62.7 in May. Wednesday it was that Durable Goods Orders unexpectedly fell 1.0% in June, the second straight monthly decline. And the Fed’s ‘Beige Book’ report tanked the market saying economic growth is “sluggish”. Yesterday’s only report was that new unemployment claims fell by 11,000 to 457,000 workers filing last week.
This morning it was the first estimate of economic growth in the 2nd quarter, which was that Q2 GDP grew 2.4%. slightly worse than the forecasts. It has weakened the pre-open indicators.
Pre-Open Indicators.
Our pre-open indicators are pointing to the Dow being down 90 points or so in the early going.
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