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By Timothy R. Homan
Feb. 27 (Bloomberg) -- The U.S. economy shrank in the fourth quarter at an even faster pace than previously estimated as companies trimmed inventories and exports sank, economists said before a government report today.
Gross domestic product contracted at a 5.4 percent annual pace from October through December, according to the median estimate of 74 economists surveyed by Bloomberg News. The forecast compares with a 3.8 percent drop estimated by the Commerce Department in its advance report issued last month.
The pace of contraction, the worst since 1982, continues unabated this quarter as companies slash jobs, orders and inventories globally. The Obama administration’s attempt to break the grip of the worst financial crisis in 70 years is unlikely to bring about immediate relief.
“This quarter will be a repeat,” said Michael Englund, chief economist at Action Economics LLC, in Boulder, Colorado, whose forecast matched the median. “We still have an inventory problem because they aren’t falling in lockstep with sales.”
Commerce’s revised figures are due at 8:30 a.m. in Washington. Estimates of economists surveyed by Bloomberg News ranged from declines of 3.8 percent to 6 percent. The data will be updated again next month as more information becomes available.
The world’s largest economy shrank at a 0.5 percent annual rate from July through September.
Other reports today are projected to show businesses contracted this month at the fastest pace in 27 years and consumer sentiment fell.
Chicago Business
The Institute for Supply Management-Chicago’s business barometer is forecast to drop to 33 from 33.3 in January. The report is due at 9:45 a.m. New York time and readings below 50 signal contraction. The Reuters/University of Michigan index of consumer sentiment, due at 10 a.m. New York time, fell to 56 from 61.2 last month, according to a Bloomberg survey.
Consumer spending, which comprises about 70 percent of the U.S. economy, dropped at a 3.7 percent pace last quarter, more than previously estimated, economists projected the GDP report will show. Purchases dropped 3.8 percent in the third quarter, marking the first back-to-back decreases in excess of 3 percent since record-keeping began in 1947.
Americans are likely to keep cutting back as jobs evaporate and confidence sinks. Companies cut 598,000 workers in January, bringing total job cuts to almost 3.6 million since the recession started in December 2007.
Job Cuts
More cutbacks are on the way. JPMorgan Chase & Co., the second-biggest U.S. bank, may reduce the headcount in its investment bank by as much as 2,000, Steven Black, co-head of the New York-based company’s investment bank, said yesterday at an investor conference.
The New York-based lender also said it will eliminate 2,800 jobs at Washington Mutual through attrition, bringing to 12,000 the total number of positions lost since the bank purchased the failed thrift in September.
A reduction in inventories last quarter, rather than a gain as previously reported, contributed to the projected downward revision in growth, economists said. Commerce, which didn’t have December figures available when the advance GDP came out, reported earlier this month that inventories dropped 1.3 percent in the last month of 2008.
December exports, which the government also had to estimate, fell 6 percent, further reducing the growth estimate, another Commerce report showed. The International Monetary Fund said last month the global economy will grow 0.5 percent this year, the weakest postwar pace, indicating U.S. exports are likely to remain depressed.
Bloomberg Survey
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GDP Personal ChicagoU of Mich
Annual Consump. PM Conf.
QOQ% QOQ% Index Index
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Date of Release 02/27 02/27 02/27 02/27
Observation Period 1Q P 1Q P Feb. Feb. F
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Median -5.4% -3.7% 33.0 56.0
Average -5.2% -3.7% 32.6 55.9
High Forecast -3.8% -3.5% 36.0 61.2
Low Forecast -6.0% -4.0% 28.8 51.0
Number of Participants 74 8 51 51
Previous -3.8% -3.5% 33.3 56.2
---------------------------------------------------------------
4CAST Ltd. -5.7% --- 32.5 57.0
Action Economics -5.4% --- 33.0 56.2
AIG Investments -4.5% --- 33.0 ---
Aletti Gestielle SGR -5.5% -3.7% 35.0 56.0
Ameriprise Financial Inc -5.3% -3.7% 31.0 55.5
Argus Research Corp. -4.5% --- 35.0 57.0
Bank of Tokyo- Mitsubishi -5.3% --- 35.0 53.0
Bantleon Bank AG -5.6% --- 33.1 56.0
Barclays Capital -5.6% --- 32.0 56.2
BBVA -3.8% --- 32.1 61.2
BMO Capital Markets -4.6% --- 31.0 55.0
BNP Paribas -4.8% --- 31.0 56.0
Briefing.com -5.0% --- 33.0 56.0
Calyon -5.5% -3.7% 32.0 56.0
CIBC World Markets -5.2% --- --- ---
Citi -5.6% --- 34.0 54.0
ClearView Economics -4.2% --- --- ---
Commerzbank AG -5.8% --- 33.0 56.0
Credit Suisse -5.7% --- 36.0 56.0
Daiwa Securities America -5.5% --- --- ---
Danske Bank -5.5% -3.7% --- ---
DekaBank -6.0% --- 34.0 56.0
Desjardins Group -5.1% --- 30.0 56.2
Deutsche Bank Securities -5.8% --- 30.5 56.0
Deutsche Postbank AG -4.8% --- --- 56.0
DZ Bank -4.0% --- 32.0 56.2
First Trust Advisors -5.7% --- 34.1 56.5
Fortis -5.4% --- 33.0 ---
FTN Financial -4.5% --- 30.0 56.0
Goldman, Sachs & Co. -5.1% --- 32.0 ---
Helaba -5.3% --- 34.0 ---
Herrmann Forecasting -5.3% --- 30.9 55.7
High Frequency Economics -4.8% --- 30.0 56.2
Horizon Investments -5.0% --- 31.0 ---
HSBC Markets -5.4% --- 30.0 56.0
IDEAglobal -4.5% --- 33.0 55.0
IHS Global Insight -5.3% --- --- 56.5
Informa Global Markets -5.7% --- 31.0 58.0
Insight Economics -5.8% --- 30.0 55.0
J.P. Morgan Chase -5.5% --- 32.0 55.0
Janney Montgomery Scott L -5.1% -3.7% --- ---
Landesbank Berlin -3.8% --- 33.0 56.0
Landesbank BW -5.7% --- 35.0 56.5
Lloyds TSB -5.2% --- 33.0 56.5
Maria Fiorini Ramirez Inc -5.0% --- --- ---
Merrill Lynch -5.1% --- 30.0 55.0
MFC Global Investment Man -5.4% -4.0% --- ---
Moody’s Economy.com -5.5% --- 28.8 55.5
Morgan Keegan & Co. -5.1% --- --- ---
Morgan Stanley & Co. -5.4% --- --- ---
National Bank Financial -5.4% --- --- ---
Natixis -5.0% --- --- ---
Newedge -4.8% -3.5% 32.1 56.7
Nomura Securities Intl. -5.6% --- 36.0 ---
Nord/LB -4.5% --- 34.0 57.0
PNC Bank -4.9% --- --- ---
Raymond James -4.5% --- --- 56.5
RBS Greenwich Capital -5.6% --- --- ---
Ried, Thunberg & Co. -5.6% --- --- 57.0
Schneider Foreign Exchang -5.1% --- 33.0 54.0
Scotia Capital -3.8% --- --- ---
Standard Chartered -5.5% -3.5% --- 51.0
Stone & McCarthy Research -5.5% --- 34.7 57.0
TD Securities -5.6% --- 32.0 56.2
Thomson Reuters/IFR -4.1% --- 33.5 56.0
UBS Securities LLC -5.4% --- --- ---
Unicredit MIB -5.5% --- --- 52.0
Union Investment -5.8% --- --- ---
University of Maryland -4.0% --- 33.0 56.2
Wachovia Corp. -5.5% --- --- ---
Wells Fargo & Co. -5.7% --- 33.0 56.2
WestLB AG -5.2% --- 34.0 56.2
Westpac Banking Co. -5.5% --- 34.5 57.0
Wrightson Associates -5.6% --- 34.0 57.0
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To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Last Updated: February 27, 2009 00:01 EST
