MIG Forex Research

So, there we have it. The Good Ol' US of A is out of recession. The first estimate of Q3 GDP saw a better than anticipated jump of 3.5% quarter on quarter. One of the main factors in the good outturn was the huge jump in Personal durable goods comsumption. This jumped from -5.6% in the second quarter to a mighty +22.3% in the third. One of the components of this sector is the purchase of new vehicles. This obviously raises a few points. Firstly, the Cash for Clunkers program 'worked' in that the boost to the auto sector of 660,000 new cars has had a positive effect on GDP growth. Secondly however, one wonders what ramifications this will have on future GDP numbers given it has brought such a large chunk of consumption forward and also lumbered the US consumer with more debt.

With the Obama administration running such a huge deficit the financing of future versions of the C4C program will become increasingly problematic. The continued retrenchment of the consumer sector, the continued failure of small US banks and the continuing restrictions in availability to small businesses will all weigh on GDP numbers heading into 2010. At a time when the Treasury buyback program has run out of funds the gradual creep higher in bond yields - US 10 years are up from 3.10 to 3.45 this month - may become a real concern over the next few months.

As noted in technical reports this week, stocks continue to hold in, and whilst the Dow holds 9599, the reent bounce in the USD remains corrective.