Economists expect the preliminary revisions to United States GDP to show the third-quarter contracting at a slightly faster pace than originally reported. Some are expecting inventories to get slashed a bit more, others anticipate even weaker spending, but most agree that the risk is to the downside.
When the advance Q3 GDP figures were announced on Oct. 30, the economy was contracting at 0.3%.
The decline was driven by a 3.1% cutback in personal consumption - the first quarterly decline since 1990 - while gross private investment was shrinking by 1.9%, including a 19.1% reduction in residential spending and a 5.6% slowdown in fixed investment.
The consensus now expects the Bureau of Economic Analysis to report a 0.5% contraction. Estimates from the 70 economists surveyed by Bloomberg are all negative, but some look for improvement to a -0.1% print, while others look for a -0.9% reading.
The forecasting team at Natixis looks for a 0.5% reduction in GDP, and says the risk is distinctly downward, "as the contribution of inventories could turn out weaker than previously estimated."
Economists at RBC expect a similar outcome, but they look for different causes. "The revision will mainly reflect modest downward revisions to consumer spending, non-residential investment in structures and business inventories," they said, adding that downward revisions will be partially offset by a stronger-than-assumed trade balance in September.
Similarly, economists at Barclays said a -0.5% print should be expected based on a downward revision to core retail sales, adding that nonresidential construction will also come in lower than initially reported.
"While other pieces of source data were also revised, particularly inventories, we expect the bulk of the other revisions to offset each other," they added.
Meanwhile, IHS Global Insight economists Nigel Gault and Patrick Newport say minor changes in different categories will mostly offset each other, resulting in a -0.4% print overall.
But assuming that the data are in line with expectations, markets are unlikely to give much weight to the report, as the figures look backwards by more than two months.
"All attention is now focused on the fourth quarter, where the picture is darkening almost daily. We had been expecting real GDP to drop 3.3% in the fourth quarter. It now looks like the decline will be at least 4%, with consumer spending also down around 4%.
Aside from the GDP headline, the report includes the GDP Price Index, which is thought to be unchanged at +4.2%, and the consumption component, which is expected to remain unchanged at -3.1%.
Barclays points out that the report will also include benchmark revisions to Q2 2008 wage and salary data, as well as the first look at Q3 2008 corporate profits.
The quarterly GDP reports released by the BEA are issued in sets of three with advance, preliminary and final versions.
By Patrick McGee and edited by Sarah Sussman
©CEP News Ltd. 2008