US first quarter GDP preview

Today final reading of U.S. first-quarter GDP will be released at 12:30 GMT.

After the United Kingdom voted in favor of leaving the Union, the focus has shifted to politics in Europe and widely away from central bank policies or the United States. The focus will be on data calculated post-referendum. In that sense, first quarter GDP not likely to be much of a mover but if the data comes much weaker than expected then it will very much fuel the negative sentiment surrounding the global economy.

Past trends –

• U.S. GDP picked up pace since 2013 and increased pace in 2014. However after rising 5 percentage and 2.2 percentage in previous two-quarters, U.S. GDP shrank by -0.1 percentage in the first quarter of 2015. Historically speaking U.S. economy usually falters in the first quarter.
• The second quarter was relatively better, with GDP growing at 2.1 percentage in the second quarter from the first.
• Growth has slowed further in third quarter, with GDP growing about 1.3 percentage.
• Final quarter GDP was much better than expected at 1.4 percentage, still meager compared to 2014.
• The first flash estimate showed GDP grew by 0.6 percentage in the first quarter this year.

Expectation today –

• It is expected to come in line with the flash estimate and 0.6 percentage growth isn’t bad, considering first quarter usually to be the worst in the year.

Market impact –

Volatility and stocks sell off may increase pace if GDP falls well below expectations. A negative number, which is unlikely may be devastating for the market sentiment.