SHANGHAI, Feb. 4 (SMM) -
US economy posted negative growth for the first time in three years, which shrank 0.1% in 4Q.
US GDP in 4Q 2012 was down 0.1% YoY.
SMM Comments: US GDP Unexpectedly Shrinks, US Dollar Index Weakens
This is the worst performance of US economy since its recovery after the financial crisis. International spot gold prices jumped at half past nine on the night of last Wednesday, up by nearly USD 17/oz within ten minutes, to as high as USD 1,680.8/oz. Meanwhile, the euro against the US dollar broke through 1.35 for the first time in thirteen months.
But US GDP in 2012 was still up 2.2%, which is higher than the 1.8% growth in 2011, despite a drop of 0.1 percentage point in US 4Q GDP. The shrinking data was mainly attributable to US cutting government spending and enterprises depleting stocks. Personal spending and investments were not below expectations. The market did not drop sharply despite sluggish market sentiment.
The spending by US federal government dropped most significantly since 1973. Government spending decreased by 6.6% in 4Q. According to an agreement reached by the Republican and Democratic negotiators, US government spending cut measures will take effect on March 1st, and will remain effective in several weeks. That means US GDP in 1Q 2013 will be affected, but declines will be offset somewhat due to positive data in the real estate sector.
US Fed Maintains Interest Rates and Easing Policy Unchanged
The FOMC announced they will maintain ultra-low interest rates at 0-0.25% since the unemployment rate stood above 6.5%, and continue the easing policy to purchase USD 85 billion of government bonds and mortgage-backed security (MBS) each month.
SMM Comments: US Fed Decision in Line with Expectations, Unlikely Affect Market Significantly
Interest rates decision by the US Federal Reserve was in line with market expectations, so the market will be affected modestly. Expectations that QE will not be halted have been absorbed.
But the US Federal Reserve pointed out US economic growth has been stagnant over the past months due to the severe weather and short-term factors. That means US economy in January will be affected somewhat, but not for a long term.
Job Increases in US Private Sector Hit 11-Month High
The US private sector added 192,000 jobs in January, which is higher than the revised 185,000 in the previous month, and a record high in 11 months.
SMM Comments: US Non-farm Data Due Friday
Market sentiment was depressed by US 4Q GDP. But whether US was sent to recession again depends on non-farm employment data due last Friday. If the non-farm data turns out to be positive, market sentiment will improve.
Euro Zone January CCI and Enterprise Sentiment Index Improve Slightly
Euro zone economic sentiment index in January rose to 89.2, better than the 88.2 expected.
Euro zone January CCI was finally -23.9, which is in line with expectations, and higher than the -26.3 in December.
SMM Comments: Euro Gains Support, Concerns Alleviate
Euro zone major economic data topped expectations, causing concerns over euro zone economic outlook to ease. Besides, international capital flowed back to euro zone countries, causing the euro against the US dollar index to break through 1.35. Market confidence towards euro zone economy improved recently.