There are numerous postings about the US recovery gaining momentum. Monday the USA Today carried an article written by Paul Davidson which states that by any economic measure the US recovery is in full swing. The USA Today report says that factories are humming, the stock market roaring and consumers are spending. The National Association of Business Economists released a report Monday which says that economists they surveyed are optimistic about US growth and job creation and 70% of those polled expect GDP to grow by more than 2% in 2010.Economists Westbury and Stein penned an article in Tuesday's Forbes edition online warning that as the economy recovers the Fed is losing sight of its main responsibility, price stability.  Wesbury and Stein say that retail sales are up 11.6% and housing starts were up 14.1% in the last six months and private payrolls are rising by 49k per month. According to Wesbury and Stein the recovery is faster than expected.

 Recent US economic data has been positive with new home sales reported to have risen at the fastest pace in 47 years up 27% in March, existing home sales rose by 6.8%  last month and US consumer confidence is at its highest level since 2008. Despite these signs of recovery Mark Hulbert of MarketWatch warns that there is a disconnect between Wall Street and Main Street with Main Street feeling less optimism about the recovery partly because of the lack of job creation. Other reports suggest the Obama administration is having hard time convincing the public that the recovery is real because unemployment remains elevated. And some economists remain concerned that the upcoming withdrawal of monetary and stimulus and anticipated deficit cuts may become a significant drag on growth. Investor Business Daily carried a report that says fiscal tightening will complicate Fed exit plans. The IMF recently raised its US 2010 GDP forecast to 1.5% from 0.8% growth forecast last July. The IMF warned that high unemployment and the risk of commercial property defaults will be a drag on the recovery. A number of economists look for US GDP growth in 2% to 3% range for 2010.

 US advanced Q1 GDP will be released on Friday, April 30th and is expected to rise by 3.4% compared to 5.6% in Q4 2009. The rise in Q4 GDP reflected an increase in inventory investment, export sales and personal consumption. The continued growth in US GDP, albeit at a slower pace in Q1, is expected to reflect strong retail sales, consumer spending and gains in business investment and spending on equipment and software. Q1 consumer spending in is estimated at 3 to 4%. Economists at Barclays have raised their forecast for US Q1 GDP from 3.5% to 4.5% because of better than expected retail sales figures during the quarter. Inventory rebuilding widening of the trade deficit, and weak construction spending will likely be drag on Q1 GDP.

 Wednesday's divergence in equity market trade suggests that the US Q1 GDP figure could have significant impact on market direction and investor sentiment. Asian and European markets plunged Wednesday in reaction to fear that the Greek crisis is spreading but the US equity market traded higher. US equities traded higher as investors shrugged off fears about the impact of the Greek crisis on the US economy. Part of the US equity market rebound reflects stronger US earnings and optimism about the US recovery. A stronger than expected US Q1 GDP report could help to boost risk appetite and reduce fear of the impact of the Greek debt crisis. A stronger than expected US Q1 GDP figure will also encourage speculation that the Fed could move its timetable forward for hiking interest rates. The USD has gained against European currencies supported by safe haven flows sparked by the debt crisis in Southern Europe. The direction of growth led currencies and the JPY are more closely linked to the direction of equities and risk appetite. An above or as forecast US Q1 GDP report will likely be a modest positive for the USD and growth led currencies. A stronger US Q1 GDP may help reduce fear that EU sovereign debt crisis will significantly impact on the US recovery. The RBA's deputy governor said that the EU debt crisis has had no impact on Australia. A strong US Q1 GDP figure may encourage the same conclusion about the US.

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