Getting ready for good ol’ GDP

Gross Domestic Product (GDP)

Tomorrow we have the GDP report coming out at 8:30 am ET. GDP is the broadest measure of growth for the US economy so I thought it would be worth spotlighting. If you aren’t familiar with GDP then take a quick minute to go to our Forexpedia to read all about it.

Here’s a snapshot of what the month to month GDP has been since 2005:

You can see that GDP has been slumping since the beginning of this year and was revised down to 2.0% for the 3rd quarter of 2006 compared to the initial 2.6% that was first reported. Translation? The US economy has been slowing down throughout 2006 as evident by the several rate pauses by the Fed.

There is a problem though. Month to month GDP can be volatile and as a result be tricky to get an accurate picture of the overall GDP trend. To help with this problem, many economists look at the year-over-year growth in GDP.

Year over year GDP growth has been like a see-saw but last quarter it actually dipped below 3%. Could tomorrow’s report push it even lower? If it does, then the dollar could be in trouble!

GDP has been moderate with slight inclinations of a decline so tomorrow’s report could be a very big market mover if the number is surprisingly high or low.