What is the U.S. Advanced GDP?
October 29th, 2008 Posted in Market Movers
The Advanced Gross Domestic Product (GDP) is a survey that is being used to measure the annualized change in the value of all goods and services produced by the relevant economy. It is defined as the total market value of all goods and services produced within the U.S economy in one quarter, in this case the 3rd quarter. The survey is released on a quarterly basis and it measures the differences compared to the same quarter in the previous year. There are three versions of the GDP released a month apart – “Advanced”, “Preliminary” and “Final”. The “Advanced” estimates are based on source data that is incomplete or subject to further revision by the source agency, while the adjusted figures are delivered through the ‘Preliminary’ version.
Traders follow this survey very closely because it is considered to be the broadest measurement of economic activity and a primary gauge of an economy’s health.
If the Survey Comes Inline with Market Forecasts
Expectations for this quarter reveal that the Advanced U.S. GDP figures will probably fall from 2.8% on the ‘Final’ publication to -0.5% on the ‘Advanced’.
Previous surveys have shown that GDP publications that go inline with market forecasts tend to leave the Dollar unchanged. They have also shown that in cases where publications have beaten analysts’ forecasts, the market was greatly impacted, and the USD had instantly rose, usually in a dramatic trend.
Because of the perceived economic weakness in the U.S. economy, any measure above the forecasted value may act as a positive which could help return the USD to its previous bullish run against the EUR. We may see a EUR/USD rate of 1.2700 contiuing through the week’s end.
If the Survey Will Surprise With Bearishness
When the actual figure is lower than forecasted, investors are likely to see the USD depreciating against its currency pairs and crosses.
Previous indicators relating to consumer spending, sentiment, and retail sales all came in below their expected values. Also the failure of Lehman Brothers in September caused major turbulence in the financial markets during the third quarter. American citizens may have been spooked by this event and kept their spending tight in the previous quarter. GDP numbers may be negatively affected as private consumption contributes a large percentage of the calculation. This leads us to believe that Advanced GDP may fail to meet expectations and send the USD lower against the EUR, possibly to the 1.2900 level.
