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Preview: Q3 Preliminary GDP

Posted:24/11/2008 20:46 by Keith Lobodzinski
  • Q3 Preliminary GDP is expected to be revised down to -0.6% following a -0.3% reading in the Advance report
  • The Q3 GDP Price Index is expected to be left unrevised at 4.2%
Consumption is expected to be revised down by $4bln, widening the drop in Q3 Real Consumption beyond the 3.1% decline reported in the advance report. The drop in Real Consumption in the advance report was the largest since Q2 1980, as ongoing strife in financial markets, extremely tight credit conditions and economic deterioration resulted in significant belt-tightening for US consumers. Durable goods could potentially be revised lower following a 14.1% decline in the Advance report.  Consumption in Non-Durables and Services could also be subject to downward revisions after coming in at -6.4% and 0.7%, respectively in the advance report. Fixed Investment spending may also be subject to downward revisions in preliminary Q3 GDP after posting a 3.1% decline previously.  Non-Residential Construction is expected to be revised down by $2bln following a 7.9% increase in the Preliminary report.  Residential Construction is likely to remain weak after posting a 19.1% drop in the Advance report. Inventories are expected to be revised lower by $6bln, after adding $12.1bln in the Advance report. September Business Inventories fell 0.2%, the largest drop since July '05, though General Merchandise Inventories gained 1.1%.  The September ISM Manufacturing Inventories Index fell to 43.4 from 49.3 prior and the September ISM-Non Manufacturing Inventories Inventories Index fell to 45.5 from 53.5 prior. Despite expectations for further weakness in international trade, Net Exports are expected to reveal a $4bln upward revision after reporting a $31.3bln surplus in the Advance report. The stronger USD has had a limited impact on exports thus declines in export should continue to be outpaced by imports in the near-term. Government Spending is also likely to reveal a marginal downward revision, with Government Construction Spending expected to be cut by $1bln, though Government Spending will continue to provide a modest benefit overall GDP in the Preliminary report. Little change is expected to the Chain Price data reported in the Advance report, with the GDP Price Index expected at 4.2% and the PCE-Core Price Index expected unchanged at 2.9%. Hurricanes Gustav and Ike, combined with the strike at Boeing, are expected to have taken a 0.5% chunk out of Q3 GDP. click here to return to the top of the page
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