The US economy contracted at a slower-than-expected pace in the second quarter as the slump in business and residential investment moderated sharply, according to government data yesterday that backed views the recession was winding down.
GDP, which measures total goods and services output within US borders, fell at a 1 percent annual rate, the Commerce Department said, after tumbling 6.4 percent in the January-March quarter, the biggest decline since a matching fall in the first quarter of 1982. It was previously reported as a 5.5 percent drop.
With the contraction in the second quarter, US GDP has fallen for four straight quarters for the first time since government records started in 1947.
The advance report showed business investment decreased at an 8.9 percent rate in the second quarter after diving 39.2 percent in the previous quarter. Investment in nonresidential structures fell at an 8.9 percent rate compared to a 43.6 percent drop in the first quarter.
Residential investment, which is at the core of the longest recession since the Great Depression, dropped at a 29.3 percent rate in the April-June period after plummeting by 38.2 percent in the first quarter.
Business inventories continued to be a drag on overall GDP, declining by a record US$141.1 billion in the second quarter as firms cut back on new production to reduce stockpiles of unsold goods.
Inventories fell by US$113.9 billion in the first quarter. The drop in inventories shaved 0.83 percentage points from second-quarter GDP. Excluding inventories, GDP fell 0.2 percent in the second quarter compared to a 4.1 percent decline in the first quarter, the department said.
Consumer spending, which accounts for over two-thirds of US economic activity, fell at a 1.2 percent rate in the second quarter after rising 0.6 percent in the previous quarter.
The freefall in exports braked sharply in the second quarter. Exports fell at a 7 percent rate after plunging 29.9 percent in the first quarter. There were positive contributions from the federal, state and local government during the second quarter.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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