The initial reading of fourth quarter U.S. GDP growthcame in at 2.8 percent, below market expectations at 3. While 2.8 percent growth would be thehighest since the second quarter of 2010, the components were widely viewed as disappointing. Inventory growth accounted for 1.9 percent of the growth, while the personal consumption contribution to growth at 1.45 percent was short of forecasts. Growth is viewed as more sustainable when it is coming from consumer demand. 

Additionally, nominal GDP was only 3.2 percent, which means that if inflation had been as high as expected, the real GDP number would have been much lower. In the event, inflation was low, allowing GDP to be as close to the 3.0 percent expectation as it was, but without the underlying nominal growth, real GDP growth looks anemic. The low Price Deflator also increases the possibility that the Fed will implement more quantitative easing on the threat of renewed disinflation.

On Wednesday, the Fed lengthened its timeframe for its conditional commitment to keep rates and an exceptionally low level from “mid-2013” to “late 2014.” It did sound an upbeat note in saying that the economy was “expanding moderately.” The U.S. dollar was sharply weaker this week on the combination of promised low interest rates and weaker GDP growth. For the week, the U.S. dollar index was down 1.8 percent, and gold rose 4.2 percent. 

Aside from the negative outlook implied by the official GDP numbers and the Fed, current economic indicators continued to look reasonably good this week. The overall earnings season improved this week, getting a boost from good numbers from Apple, Boeing, and Caterpillar. The S&P 500 was virtually unchanged for the week. Durable goods orders and consumer sentiment from the University of Michigan were better than expected.

Similar to what we reported here last week, talks between Greece and its creditors continue to make slow progress. This week, an agreement is reportedly “one step away.” It appears that the breakthrough made this week was that the agreement will allow the Credit Default Swaps to be triggered, as opposed to a completely “voluntary” write-down of the debt. The euro rose against the dollar by 2.2 percent.Crude oil rose $1.10 for the week, but the real excitement was in RBOB gasoline which was up $.1424 on the week, a 5 percent gain. Refinery issues were the main driver for gasoline.     

Nearby corn futures finished the week on a string of seven straight non-losing sessions (it closed unchanged on Thursday), led by strong cash markets. Farmer selling shut-off following the bearish January report and cash markets have been generally on the climb since then. Reuters reported that prompt cash basis at the Gulf reached the highest this week in at least 10 years. Some of the squeeze may be related to commercial logistics, but export demand has also been picking up. Weekly export sales were the biggest since mid-October at 958 tmt. The daily reporting system lit up on Friday with a 170 tmt sale to Mexico. Weekly ethanol production was lower for the third straight week at 934 thousand barrels/day, down 7 from last week. For the week, corn was up30.25 cents.

The Buenos Aires Grain Exchange came out this week with its first estimate of Argentine production of 46.2 mmt. The USDA January estimate was 50.5 mmt. Rains improved in some of the South American growing areas this week, but production estimates are still edging lower. Too much rain in Brazil is hampering early export programs. Weekly exports were off sharply from the previous week at 466 tmt. For the week, nearby soybeans were up 32 cents.

The thought that the torrent of cheap wheat that has surged into world export markets from the Black Sea region since the middle of 2011 may come to an end gained currency this week. There was no official word on export “curbs,” but speculation rose after projections of export totals through the spring show them reaching levels that Russia specifically would be expected to react to. Export prices have already risen.Estimates for Ukraine’s upcoming harvest are being lowered on weather issues. Weekly U.S. export sales for wheat were the highest since mid-November at 605 tmt. Daily sales of 133 tmt to unknown were reported on January 27. For the week, Minneapolis was up 27.5 cents, Chicago was up 36.75 cents, and Kansas City was up 33 cents.