US Growth Stalls at 0.2% in Q1, Weighing on Stock Futures

© Flickr / nikzaneUS-flag emblazoned factory on Wilmington Ave and 223rd St in Carson CA (Longbeach
US-flag emblazoned factory on Wilmington Ave and 223rd St in Carson CA (Longbeach - Sputnik International
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The actual reading of the US economic expansion in Q1 is shockingly well below the previous estimates and is barely over zero, a bad sign for America’s financials and foreign exporters.

Kristian Rouz — US GDP data arrived early Wednesday morning to a shocking surprise, indicating the world's biggest economy grew by only 0.2% in Q1 2015, as compared to the previous consensus estimates of 1%. Wall Street futures slumped overnight, and Wednesday trading is anticipated to open in the red. Consequently, the Fed is now certainly expected to take a dovish stance amidst its two-day policy meeting still underway, with the rate hike not coming until September.

A trader works on the floor of the New York Stock Exchange (NYSE) on February 6, 2015 - Sputnik International
US Stocks Mixed Amidst Moderate Macro Data, Fed Wary
US economic expansion nearly halted in Q1, added only 0.2% due to the harsh winter weighing on consumer demand, while energy companies suffered low commercial viability amidst low oil prices. These negative tendencies, add here the decline in overseas profits hampered by a stronger dollar, had been considered in previous consensus estimates, nonetheless, the actual figure came as a huge and unpleasant surprise.

The Fed is now not expected to increase its base interest rate at least until September. Consequently, investors are bearish, and overnight the S&P 500 futures shed 13 points toward the lower open, while the Dow futures declined 127 points and Nasdaq futures slid 26.25 points.

In Q1, the S&P 500 posted unprecedented gains, while the real economy approached a stall. The most dramatic negative trend of the quarter had been a decline in fixed investment. According to some estimates, the underinvestment bit some 0.4% off the potential Q1 expansion in the US GDP. US fixed investment slid 0.6207% in Q1, the worst since Q4 2009.

The massive crude oil stockpiles the US has accumulated amidst lower fuel prices, contributed some 3% of the Q1 GDP growth, meaning without the shale oil boom in North America the US economic growth would have accounted for some minus 2.8%.

However, this is not the dramatic news, as the Q1 2014 US GDP growth was 2% negative.

Today's data is a negative sign for stocks. However, the US dollar resumed its advance against its major peers in early hours trading on Wednesday, while gold tumbled, as did 10-year Treasuries. The US GDP reading is not that bad, but still shocking if compared to previous expectations. Markets are yet to reassess the aggregated effect of the soft data, but obviously dollar liquidity will remain ultra-cheap for some more time — bad news for Japanese and European exporters.

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