July 29, 2014

GDP: An Eerie Quiet

Filed under: Economy,Taxes & Government — Tom @ 11:59 pm

I could not find predictions for second-quarter GDP growth, which gets reported tomorrow, at either the Associated Press or Bloomberg News. That will obviously change within about 6 hours or sooner, but it’s very odd for those two outfits not to have a current story on the first GDP measurement in a quarter.

Reuters does have a prediction, and also expects upward revisions to GDP for the past five years — make that 15 years! — when that information is published in tomorrow’s report:

Consumer spending, inventories seen lifting U.S. second-quarter GDP

U.S. economic growth likely rebounded in the second-quarter from a winter-induced slump at the start of the year and will probably continue to gather momentum through the rest of 2014.

Gross domestic product likely grew at a 3.0 percent annual rate, according to a Reuters survey of economists, lifted by an acceleration in both consumer spending and stock accumulation by businesses.

“Pretty much across the board, components will look better. I do think we can sustain a 3 percent growth number for the next couple of quarters,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Earlier in the second quarter, growth estimates were as high as 4 percent, but they were lowered as consumer spending and business investment rebounded less than expected.

As I’ve noted in several posts during the quarter, it’s hard to see where the hard-dollar improvements are going to come from. The “good news” has tended to come from sentiment indices. The less stellar news has come from reports attempting to actually measure what’s happening.

Now, as to that comprehensive prior-year revision:

Economists expect upward revisions to output for the last three years, noting that an alternative growth measure, gross domestic income, is running above GDP. The government tends to revise GDP towards GDI.

“Upward revisions to GDP would also be consistent with the performance in the labor market, which has been unusually strong relative to recent growth patterns,” said Eric Green, chief economist at TD Securities in New York.

The GDP data will be released only hours before U.S. Federal Reserve officials conclude a two-day policy meeting. It is not expected to have a material impact on the future course of monetary policy, with Fed Chair Janet Yellen focused on labor market developments and inflation.

Call me cynical, but … I think the Fed has been meeting with full knowledge of what tomorrow’s report is going to say, that the information has leaked, and that the reason for the eerie quiet is that the news isn’t very good.

We’ll see tomorrow.

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1 Comment

  1. [...] Reuters, as noted last night, carried a prediction of 3.0 percent. [...]

    Pingback by BizzyBlog — July 30, 2014 @ 7:36 am

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