U.S. fourth quarter GDP preview

Today, U.S. fourth-quarter GDP figure will be released at 12:30 GMT.

This is the final reading of the fourth quarter GDP of the United States.  This would be a very vital piece of an economic docket to assess the health of the economy.

This will be an indicator to see how the US economy is fairing under the Trump administration which reportedly reduced regulations and recently passed much-anticipated tax cuts and reforms. 

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 -0.2 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 the 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.
• GDP grew by 1.1 percent in the first quarter of 2016 and the second quarter GDP grew by 1.4 percent and finished the year with 3.5 percent and 2.1 percent growth in the third and fourth quarter.
• In the first two quarters of 2017, GDP grew by 1.4 percent and by 3.1 percent. GDP grew by 3.2 percent in the third quarter. See chart for details

Expectation today –

• It is expected on the upper side today.  According to median estimate, the economy is expected to grow by 2.7 percent annualized rate in the fourth quarter. The previous flash report flagged economic growth at 2.5 percent.

Market impact –

If the actual number comes in line with the expectations, it would be considered quite well and would help in restoring further confidence in the US economy but if that fails to impress and drops below 2 percent (Unlikely), the dollar might take a big hit to the downside. Any major upside surprise over 3.2 percent would be a major boost for the dollar and the U.S. indices.

A number in line with the expectation is unlikely to be positive for the Dollar as it already remains downbeat despite tax reform as the focus is on monetary policies from other central banks and trade tensions.

The dollar index, which is the value of the dollar against a basket of currencies, is currently trading at 89.44, up 0.13 percent so far today.