Economic Growth in U.S. May Show Consumer Spending Cooled
U.S. Federal Reserve chairman Ben S. Bernanke. Photographer: Joshua Roberts/Bloomberg
July 30 (Bloomberg) -- Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ, discusses the outlook for today's Commerce Department report on U.S. gross domestic product in the second quarter. She talks with Bloomberg's Jon Erlichman on Bloomberg Television's "InsideTrack." (This is an excerpt of the full interview. Source: Bloomberg)
July 29 (Bloomberg) -- Rick Sharga, senior vice president for marketing at RealtyTrac Inc., talks with Bloomberg's Mark Crumpton about U.S. foreclosure filings. Foreclosures climbed in three-quarters of U.S. metropolitan areas in the first half as high unemployment left many homeowners unable to pay their mortgages, according to the Irvine, California-based mortgage-data company. (Source: Bloomberg)
The U.S. economy probably grew in the second quarter at about the same pace as in the prior three months, driven by a pickup in business investment as consumer spending cooled, economists said ahead of a report today.
The 2.6 percent gain in gross domestic product from April through June would follow a 2.7 percent first-quarter increase, according to the median estimate of 81 economists surveyed by Bloomberg News. Household purchases climbed 2.4 percent after expanding 3 percent, the survey showed.
The pace of growth means employers may be reticent to boost payrolls and are more likely to keep a lid on prices to sustain sales. Federal Reserve Chairman Ben S. Bernanke last week said the central bank is prepared to take further policy actions if the world’s largest economy “doesn’t continue to improve.”
“This is a half-speed recovery,” said Robert Dye, a senior economist at PNC Financial Services Group Inc. in Pittsburgh. “Business investment is coming back in typical recovery fashion. Consumers are certainly not leading.”
The Commerce Department’s GDP report is due at 8:30 a.m. in Washington. Survey estimates ranged from gains of 1 percent to 4 percent. Today’s GDP report also will include annual revisions going back to 2007.
A dearth of jobs, a loss of household wealth resulting from the slumps in stocks and housing, tight credit and the need to reduce debt and rebuild savings are reasons economists forecast spending will be slow to recover.
Lack of Jobs
Company payrolls rose by 83,000 in June, less than the median forecast by economists surveyed by Bloomberg, figures from the Labor Department showed July 2. The economy lost 125,000 jobs overall, reflecting a reduction of census workers as the decennial population count started winding down. The unemployment rate fell to 9.5 percent as discouraged workers dropped out of the labor force.
A widening trade deficit also depressed growth last quarter, economists said. The gap adjusted for inflation, the figures used in calculating GDP, averaged $45.1 billion a month in April and May, up from $42.3 billion a month in the first quarter as imports climbed faster than exports, according to figures from the Commerce Department.
Business investment is one area showing continued strength. Shipments of non-military capital equipment excluding aircraft climbed at a 16 percent annual pace in the three months ended June after growing 12 percent in the first quarter, figures from the Commerce Department this week showed. Orders for such goods, a proxy for future corporate spending, grew at a 25 percent pace following a 15 percent first-quarter increase.
Manufacturing Shares
Manufacturers are benefiting as companies here and abroad update equipment and add to inventories. The Standard & Poor’s Supercomposite Machinery Index, which includes companies such as Caterpillar Inc. and Deere & Co., is up 13.5 percent so far this year. The broader S&P 500 Index is down 1.2 percent.
Caterpillar, the world’s largest maker of construction equipment, last week raised its full-year earnings forecast on higher demand in developing countries for mining, energy and rail equipment.
“You’ve got strong growth in India and China that provides demand for commodities,” Chief Financial Officer Ed Rapp said in an interview July 22. “Most of the mining is happening in the developing parts of the world.”
One industry likely to weigh on GDP in the coming months is housing. Home sales have plunged after a government tax credit expired on April 30.
The labor and housing markets are causing Americans to be more pessimistic about the economy. The Thomson Reuters/University of Michigan index of consumer sentiment, due at 9:55 a.m. New York time, dropped to 67 this month from 76 in June, according to the survey median.
The GDP estimate is the first of three for the quarter, with the other releases scheduled in August and September when more information becomes available. The government will estimate June figures for trade and inventories, which will not be available until next month.
Bloomberg Survey
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GDP Personal Chicago U of Mich
Annual Consump. PM Conf.
QOQ% QOQ% Index Index
==============================================================
Date of Release 07/30 07/30 07/30 07/30
Observation Period 1Q A 1Q A July July F
--------------------------------------------------------------
Median 2.6% 2.4% 56.0 67.0
Average 2.6% 2.5% 56.2 67.2
High Forecast 4.0% 3.2% 60.0 73.0
Low Forecast 1.0% 2.0% 50.0 57.5
Number of Participants 81 20 53 58
Previous 2.7% 3.0% 59.1 66.5
--------------------------------------------------------------
4CAST Ltd. 2.7% --- 55.0 68.0
Action Economics 2.0% --- 57.0 68.0
Aletti Gestielle SGR 2.7% 2.3% 56.0 67.0
Ameriprise Financial Inc 2.3% 2.8% 57.5 67.0
Banesto 2.5% --- 57.8 66.9
Bank of Tokyo- Mitsubishi 2.7% --- 54.4 68.3
Barclays Capital 3.0% 2.5% 57.5 68.0
Bayerische Landesbank 3.0% 2.8% --- 66.5
BBVA 3.2% 2.8% 58.5 66.5
BMO Capital Markets 3.0% --- 56.0 67.0
BNP Paribas 2.2% --- 54.0 67.5
BofA Merrill Lynch Research 2.5% 2.0% 56.5 67.5
Briefing.com 3.0% --- 58.5 67.5
Capital Economics 3.2% --- --- 66.5
CIBC World Markets 3.3% --- --- ---
Citi 2.3% 2.3% 55.0 66.5
ClearView Economics 2.4% --- 57.0 66.0
Commerzbank AG 2.7% --- 55.0 66.5
Credit Agricole CIB 2.2% --- 58.0 68.5
Credit Suisse 3.1% 2.4% 56.0 67.0
Daiwa Securities America 2.0% --- --- 66.5
DekaBank 2.7% --- 56.0 67.0
Desjardins Group 2.8% --- 57.0 66.5
Deutsche Bank Securities 3.0% --- 58.0 68.0
Deutsche Postbank AG 2.6% --- --- 67.0
DZ Bank 2.5% --- 58.0 67.0
Exane 2.7% --- 56.5 ---
First Trust Advisors 3.3% --- 58.4 67.0
Fortis 2.7% --- 55.0 68.0
FTN Financial 2.3% --- --- 68.5
Goldman, Sachs & Co. 2.0% --- 57.5 ---
Helaba 2.4% --- 55.0 ---
High Frequency Economics 2.5% --- 57.0 66.5
HSBC Markets 2.9% 2.3% 54.0 67.0
Hugh Johnson Advisors 2.2% --- 60.0 66.5
Ibersecurities 3.0% --- --- ---
IDEAglobal 2.8% 2.1% 55.0 68.0
IHS Global Insight 3.0% --- --- 69.0
Informa Global Markets 2.3% 2.3% 58.0 66.7
ING Financial Markets 2.9% --- 56.0 57.5
Intesa-SanPaulo 2.6% --- 56.0 67.0
J.P. Morgan Chase 2.8% 2.2% --- 67.0
Janney Montgomery Scott 2.2% 2.0% --- ---
Jefferies & Co. 2.5% --- 50.0 ---
Landesbank Berlin 1.0% --- 53.0 67.5
Landesbank BW 2.5% --- 57.0 68.5
Maria Fiorini Ramirez 3.0% --- --- ---
MF Global 3.3% --- 55.0 67.0
MFC Global Investment 3.6% 3.2% --- ---
Mizuho Securities 1.0% --- 55.0 65.0
Moody’s Economy.com 2.0% --- 57.5 68.5
Morgan Keegan & Co. 2.9% --- --- ---
Morgan Stanley & Co. 3.2% --- --- ---
National Bank Financial 3.0% --- --- ---
Natixis 2.1% 2.5% --- ---
Nomura Securities Intl. 2.2% --- 54.0 ---
Pierpont Securities LLC 3.1% --- --- 68.0
PineBridge Investments 3.0% --- 54.0 65.0
PNC Bank 2.6% --- --- ---
Raiffeisen Zentralbank 4.0% --- --- 73.0
Raymond James 1.8% --- --- 68.0
RBC Capital Markets 2.5% 2.4% 56.0 67.4
Ried, Thunberg & Co. 2.5% --- --- 68.0
Saxo Bank 2.6% 2.6% --- ---
Scotia Capital 2.8% --- --- ---
Societe Generale 2.7% 2.8% --- ---
Standard Chartered 2.4% 2.3% --- 67.0
State Street Global Markets 2.4% 2.4% 54.8 66.5
Stone & McCarthy Research 2.5% --- 51.4 67.0
TD Securities 2.6% --- 55.5 67.5
Thomson Reuters/IFR 2.3% --- 55.5 69.5
Tullett Prebon 2.5% --- 58.0 ---
UBS 2.5% --- 56.0 66.5
UniCredit Research 2.3% --- --- ---
Union Investment 2.5% --- --- ---
University of Maryland 2.4% --- 57.9 66.5
Wells Fargo & Co. 2.4% --- --- ---
WestLB AG 2.8% --- 58.0 66.0
Westpac Banking Co. 2.5% --- 55.0 ---
Woodley Park Research 2.4% --- 56.5 67.3
Wrightson Associates 2.5% --- 59.0 68.0
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To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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