U.S. GDP looks to be revised higher
Tuesday, September 28, 2004 10:23:53 PM
afxpress.com
WASHINGTON (AFX) -- When it comes to economic data, the third time is rarely charming. Or market moving
The Commerce Department will release its third estimate of second-quarter gross domestic product on Wednesday at 8:30 a.m. Eastern
Economists expect a small upward revision to 3.1 percent annualized from 2.8 percent, according to a survey of 37 economists conducted by CBS MarketWatch
About half of the expected upward revision will be due to higher inventory accumulation, said David Rosenberg, chief North American economist for Merrill Lynch, in a research report. Imports likely didn't subtract as much from growth as previously assumed. Investments in residences look to be revised higher as well
The revisions probably won't change the big-picture view that consumer spending slowed sharply in the quarter, increasing just 1.6 percent, the weakest since the depths of the recession. Business investment accelerated in the second quarter to a 12.1 percent annual pace. Despite the improvement, investment flows are still below pre-recession levels. "We are still in a 'post-bubble' world," Rosenberg said. "The bust left massive excess capacity in the system, and with a 74 percent operating rate for the finished goods sector, that really has not changed much." The productive capacity of U.S. industry has grown just 1.4 percent in the past year. The economy still has massive reserves of unused capital and labor sitting idle. No wonder inflation is as tame as it is
It's possible the key inflation indexes in the GDP will also be revised. A revision here could spur some movement in the financial markets
"A downward revision to the second-quarter core [personal consumption expenditure] price index growth rate would be very bullish news [for bonds] on Wednesday," said Bill Sharp, an economist for J.P. Morgan. At this point, most economists are focused on the third-quarter numbers, rather than on the ancient tales told by the second-quarter data. The average estimate from the MarketWatch survey sees growth rebounding to a 3.8 percent annual rate in the quarter that ends on Thursday. "The expansion is hardly faltering," said Michael Moran, chief economist for Daiwa Securities America. "Figures in hand suggest that growth in the third quarter will total close to 4 percent." Although retail sales have been somewhat tepid, consumer spending is on track to increase at a 3 percent pace in the third quarter, he added. |
