- Sam Coffin, an economist at UBS Securities LLC
The world's largest economy posted its first contraction in three years in the first quarter of 2014. This is not a warning, not at all, as it was widely expected both by analysts and the Fed, hence, they will simply write if off, blaming weather for the weak performance. Markets were also not expected to react very actively, and a 0.23% decline versus the Euro over the day was in line with estimates. The single currency was not able to benefit from the report, keeping in mind it is under pressure ahead of ECB's June's meeting.
A widely-anticipated report from the Department of Commerce showed the gross domestic product shrank at an annual pace of 1.0% in the first three months, compared with an expected drop of just 0.5%. The last time American economy contracted was the same quarter back in 2011. Higher interest rates pushed home buyers aside and dampened investment inflow, while harsh winter kept government, shops and factories closed. In contrast, a pickup in receipt at retailers, faster job growth and stronger manufacturing are all suggesting the slowdown is temporary. The latest FOMC minutes also showed the economy is gathering momentum after adverse weather took its toll.
Meanwhile, the labour market is on the mend, this is not a question. Especially, with jobless claims around 300,000, while four-week moving average is fluctuating around 311,000.
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