GDP (QoQ)(2Q F)

Previous       3.3%
Forecast       3.3%

Definition     

The total market value of all goods and services produced within the political boundaries of an economy during a given period of time, were usually it's calculated on an annual basis.  The GDP is usually looked at as the official measure to the health of an economy as it reflects the nation's productivity. GDP is divided among personal consumption, investment, net exports, and governmental spending as follows:

GDP = C + G + I + NX

where:

"C" refers  to all private consumption, or consumer spending, in a nation's economy; this includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing.
"G" refers to the sum of government spending; from salaries to the public sector to military purchases expenditure; the measure does not include transfer payments such as social security or unemployment benefits.
"I" refers to the sum of all the country's businesses investment in capital; spending by households on new houses for example is also included in Investment. 'Investment' in GDP is specifically identified as non-financial product purchases.
"NX" refers to the nation's total net exports of goods and services minus total imports, since they are already included in C, I, or G thereby should be deducted to not count foreign supply as domestic (NX = Exports - Imports)

Commonly data are complied and released on a quarterly basis coming out in the month after a quarter has ended, usually reported in "real" terms, which is economic growth minus the effect of inflation. The reading is released throughout the course of the quarter revised at least two times until the final reading; the sequel starts with the Advanced Estimate, then the Preliminary Reading, and then the Final Reading. Some countries report their GDP reading in annualized term like the United States, which is what the annual change would be if the quarter's pace of growth or contraction continued for a year.

General Effect     

The GDP is considered a very important indicator that moves the currency markets hectically for the value of such a reading.  The reading is merely a reflection of a certain economy's performance in a specified period of time; therefore any improvement reflects the wellbeing of the economy in all its considered aspects. Consequently, a revitalized economy is reflected positively on the currency providing strength and demand on that currency.


The GDP reflects the markets' cycle that is starting by the consumer with increased income and high confidence in the economy would likely rise the level of spending therefore production levels increase more employment resulting in  the  availability for more cash to spend empowering the cycle of production, which in result ends by empowering the currency.

The effect as mentioned is positive on the currency and direct; as for the equity markets the effect is towards the upside as well for the unbreakable tie that links any economy to the equity market, if there is growth there is defiantly an increase in the equity as well for it is a reflection of the output of that economy. Therefore any increase in the GDP affects positively the currency as well as the equity market and the opposite of this is as well applicable.

Best Case     An upside revision to the GDP could prompt the fact that US economy wasn't severely damaged and the effect of the credit crisis wasn't as bad as once thought therefore perhaps allowing the approval of the entire bailout plan to limit further slowdown

Worst Case     A revision to the downside will show that world's greatest economy is still in threat of further slowing down and that the worse has yet to come putting the Feds in even a harder place adding more pressure on the Congress to approve only a portion of the suggested bailout plan