Release Explanation: This report measures the monetary value of all goods and services produced within a Country’s borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy’s overall health. It includes all Company and Personal consumption, government outlays, investments, and exports less imports, that occur within a defined territory. Trade Team notes that a strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time:
TIC Data because of overseas investors wanting to participate in future growth, or liquidate investments in an economy moving into a period of contraction.
CPI because a reducing GDP outlook will therefore reduce the rate of future Inflation, as an increasing GDP outlook will likely lead to Inflationary pressures.
Retail Sales, Consumer Confidence, PCE, they all are affected by the strength or weakness of GDP.
A volatile release because just one airplane order not accounted for can move the number by 0.5% and therefore lead to volatile re-alignments of Currency positions. Trade Desk Thoughts: Real gross domestic product (GDP) contracted at a 6.1% annual pace in the first quarter of 2009, the Commerce Department said today. Currently, the U.S. Economy is facing the worst performance since the Second World War. From one year ago, the U.S. economy contracted 2.6%

“Despite all the recent positive reports in the financial markets, the economy has retained the same strong contraction pace in the first quarter of 2009.” Trade Team noted. “Even though most officials said the economy will be on the path towards recovery in the second part of the year, the current release raises some big questions about whether these forecasts are really sustainable,” they added.

Consumer spending saw considerable progress in the first quarter from the previous one. In Q1 2009, personal expenditures rose 2.2%, compared with a 4.3% decline in the fourth quarter. In particular, durable goods rose 9.4% in the first quarter, after plunging 22.1% in the previous one.

However, except for consumer spending, the other major components of the GDP continued to decline into the first quarter. Fixed investments fell 37.9% in Q1 2009, after a 21.7% decrease in Q4 2008. Nonresidential structures decreased 44.2% in the first three months of the year, compared with a decrease of 9.4 percent in Q4 2008.

Real exports of goods and services decreased 30.0% in the first quarter, compared with a decrease of 23.6% in the fourth. Real imports of goods and services decreased 34.1%. The real change in private inventories subtracted 2.79 percentage points from the first quarter change in real GDP, after subtracting 0.11 percentage point from the fourth-quarter change. Private businesses decreased inventories by $103.7 billion in the first quarter, the biggest drop since 1947. Federal government spending decreased 4.0% in the fourth quarter, reversing the trend seen over the last few quarters.
Forex Technical Reaction: S&P futures dropped 4 points during the release, but recovered very quickly. The release had a weak reaction in the currency market, with the major currencies bouncing from the session highs.