Thursday 28th May 2020 - 13:41 (BST)
Figures released by the US Bureau of Economic Analysis have indicated the US economy contracted at a rate of -5% (second estimate) over Q1 2020. This was higher than the market expectation of -4.8% and failed to match the initial estimate from last month. It’s only the second negative reading since 2014 and the lowest level since the 8.4% plunge of Q4 2008.
Consumer expenditures, which comprise 67% of total GDP, saw a sharp drop of 7.6% over the quarter as all nonessential stores were closed to help stem the outbreak of Covid-19. Exports also tumbled 8.7% while imports fell 15.3%, including a 30% drop in services.
The US dollar remains range-bound on the back of the news, buoyed by more positive jobless and durable goods orders data. Many economists now expect the Q2 GDP reading to be one of the worst post-WW2, as the full effects of the nationwide lockdown will be incorporated into the figures.
Traders also remain focussed on escalating tensions between the U.S and China over new security laws for Hong Kong. Secretary of State Mike Pompeo told Congress on Wednesday that Hong Kong risks losing its special status with the U.S. over concerns that the laws will diminish its independence from Beijing.
