U.S. third quarter GDP preview

Today, U.S. third quarter GDP figure will be released at 13:30 GMT.

This is the second flash reading of the third quarter GDP of the United States.  This would be a very vital piece of an economic docket to assess the health of the economy. In recent days, concerns have surfaced that the economy could face recession in the next 12 months. JPMorgan has estimated that there are one in three chances that the economy would face a recession next year. New York Fed’s recession indicator has reached the highest point since the 2008/09 crisis; however, it has eased somewhat in recent past. At this point, a strong figure is very much needed to restore confidence and in the absence of which, risk aversion might hit the financial markets as the Fed prepares to hike rates.

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 first quarter.
• The second quarter was relatively better, with GDP growing at 2.1 percentage in 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.
• GDP grew by 1.1 percent in the first quarter of 2016 and the second quarter GDP grew by 1.4 percent.
• According to the first flash estimate, GDP grew by 2.9 percent annualized rate in the second quarter.

Expectation today –

• It is expected on the upper side today.  According to median estimate, the economy is expected to grow by 3 percent in the third quarter.

Market impact –

If the actual number comes in line with the expectations, it would be considered very well and would help in restoring confidence in the US economy but if that fails to impress and drops below 2 percent (Unlikely), the dollar might take a hit to the downside.

The dollar index, which is the value of the dollar against a basket of currencies, is currently trading at 101.45, up 0.29 percent today so far.