1Q USA Economy is ‘Worse Than the Worst-Case Forecast’ (1)

–While the GDP data is surprisingly bad, the world’s biggest economy shrinking might be a blip related to inventories; one analyst told BBC Worldservice the data was outside the range of expectations

Figures from the Commerce Department showed that gross domestic product fell at an annualised rate of 1.4%, BBC says.

See this analysis: from Oanda, which provides brokerage and currency services:

Stability Amid Tech Earnings

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Equity markets have stabilised a little in the middle of the week, with big tech earnings failing to steer them significantly one way or another.

It’s been a mixed bag from the big tech firms so far and there’s still plenty to come, with Apple and Amazon due to report after the close. Meta is up more than 14% on the day after reporting user growth that pleased investors. This came despite the difficulties it continues to face as a result of iPhone changes and a challenging ad environment. 

With the stock off more than 50% from its peak in September prior to the release, the rally has come from a relatively low base. There’s still plenty for investors to be concerned about, not least from rival social media platforms that are strongly attracting the younger audience, but this small reprieve buys Meta time to address that and for ad revenue to pick up. 

Twitter reported what could be its final quarterly earnings as a public company earlier, beating expectations on earnings and monetizable daily active users while falling a little short on revenue. The share price was little changed in the aftermath of the report, which is unsurprising given Elon Musk’s proposed takeover. ​ 

No impending recession in the US

What was surprising was the contraction in the US in the first quarter. That is until it became clear that it was driven by lower inventory building and higher imports versus exports in the quarter. The impact of both of these will be temporary and in the case of inventory, will reverse this quarter. Underlying economic indicators remain strong so despite the headline number, the world’s largest economy is not heading for a recession. 

Oil range tightening is perhaps a sign of a coming breakout 

Oil prices are edging higher on Thursday, continuing to recover from the lows earlier this week when Brent briefly breached $100 again. Ultimately, we’re continuing to see consolidation in crude markets, with the range tightening and potentially setting us up for a volatile breakout in the coming weeks.

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CarrZee: This bad economic performance is bad news for climate action, because politicians will probably use the economy as an excuse to proioritize away from cleaning up. This would be the wrong choice. Doubling down on climate action would, as a better strategy, boost the U.S. economy short-and-long term.

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BBC snip: The US economy contracted in the first three months of the year partly due to a resurgence in coronavirus cases disrupting businesses.

Figures from the Commerce Department showed that gross domestic product fell at an annualised rate of 1.4%.

Slower economic growth was expected in the first quarter of the year, but the figure was worse than forecast.

It is the first contraction in the economy since the pandemic-induced recession in 2020.

Recovery from that shock has largely been faster than expected, helped by government spending, including pandemic relief cheques to households. In the last three months of 2021, the US economy expanded at an annualised rate of 6.9%.

Analysts said a surge in imports, which count against output, distorted the figures from the start of the year, making the economy look worse than it was.

“This is noise; not signal,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The economy is not falling into recession.”

Photo by Sharefaith on Pexels.com

One comment

  1. Inspiration/comment 🙂

    What has defined the EUA market in Q1 is that emissions are now cheap to energy prices. Physically: Utility/traders are loading up coal piles on the russian gas/coal export ban.

    While Financial Accumulation was a constant feature of the 21′ Carbon market financial retail participation is markedly down.

    Opinion:

    Smart money should not bet against EUA ( unless shorting energy is their will).

    The downside: A subset of factors including the usd/eur at a one-year high, indicates that the macro flow prefers shunning risk-assets.

    The Risk/Reward of shorting carbon is certainly not compelling when looking at 1 EUA 24′ to 1 Kwh of Coal ex-germany[1].

    To conclude someone is short, on the opposite side and matches what comes in. He doesn’t want prices to go up and as long as the retail and macro flows are out he can maintain the control on the action; volume is thin.

    Liked by 1 person

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