Economy in U.S. Likely Grew as Consumer Spending Climbed
The U.S. economy probably grew at a faster pace in the third quarter as consumer spending climbed, a sign the expansion is developing staying power, economists said before a report today.
Gross domestic product rose at a 2 percent annual pace, up from a 1.7 percent rate in the prior three months, according to the median estimate of 83 economists surveyed by Bloomberg News. Household purchases, about 70 percent of the economy, probably had the best quarter of the recovery that began in June 2009.
The rate of growth is short of what’s needed to cut a jobless rate stuck near 10 percent, a concern that may lead Federal Reserve policy makers next week to pump more money into the world’s largest economy. Wal-Mart Stores Inc. is among retailers cutting prices to attract shoppers, while rising exports mean factories will remain a pillar of the rebound.
“The consumer was the big standout last quarter,” said Omair Sharif, an economist at RBS Securities in Stamford, Connecticut. “But the economy is on cruise control, and there’s nothing really to drive faster growth that’ll quickly reduce unemployment.”
The Commerce Department report is due at 8:30 a.m. in Washington. Forecasts in the Bloomberg survey ranged from 0.5 percent to 3.6 percent.
The GDP estimate is the first of three for the quarter, with revisions in November and December when more information becomes available.
Shares Rally
The Standard & Poor’s 500 index has climbed 11 percent since Aug. 27, when Fed Chairman Ben S. Bernanke said the central bank “will do all that it can” to sustain the economic recovery. Investors are anticipating the central bank will announce another round of asset purchases after buying $1.7 trillion in debt from December 2008 to March.
The Fed meets Nov. 2-3 to consider steps to boost an economy growing too slowly and prevent inflation, which remains below its longer-term projections, from cooling even more. Growth in the 2.5 percent to 2.8 percent range is consistent with keeping the jobless rate stable, according to policy makers’ latest forecasts.
At 9:45 a.m., figures from the Institute for Supply Management-Chicago Inc. may show business activity expanded at a slower pace in October. The group’s barometer fell to 58 from 60.4 in September, according to the Bloomberg survey.
Manufacturing gains, which continued to drive growth in the third quarter, are cooling as the pace of inventory rebuilding eases following a surge that began in late 2009.
Stable Sentiment
Another report at 9:55 a.m. may show the Thomson Reuters/University of Michigan final index of consumer sentiment was little changed this month from September, according to the survey median.
While confidence is mired below pre-recession levels, stock-market gains and reduced debt may be allowing consumers to increase spending, which bodes well for the holiday season. The GDP report may show household purchases rose at a 2.5 percent annual rate, the biggest gain since the end of 2006, according to the survey median.
“Consumer spending appears to have perked up” and business investment posted “another solid advance” last quarter, Morgan Stanley economist David Greenlaw wrote in a report. Even so, much of the boost came from inventory building, which added about 1.5 percentage points to growth, he said.
The National Retail Federation has forecast November- December sales will rise 2.3 percent from a year ago, making it the best holiday season in four years.
Bargain Hunting
Wal-Mart, the world’s largest retailer, Target Corp., Amazon.com Inc. and EBay Inc. are among merchants that will benefit as holiday shoppers seek bargains, according to results of a survey issued this month by Consumer Edge Research in Stamford, Connecticut.
Target, the second-biggest discount retailer, said this month it would lower prices on more than 1,000 toys to attract shoppers. Its larger rival responded with its own discounts, advertising saving on brands such as Barbie and Nerf toys.
Miami-based Royal Caribbean Cruises Ltd., the world’s second-largest cruise operator, raised its 2010 profit forecast and predicted record earnings next year. Passenger bookings are rebounding since Chief Executive Officer Richard Fain slashed ticket prices and costs last year.
Demand is now “steady and solid,” Fain said in an Oct. 26 statement. “The economy is still tough, but even facing such headwinds, our outlook is remarkably encouraging.”
Bloomberg Survey
==============================================================
GDP Personal Chicago U of Mich
Annual Consump. PM Conf.
QOQ% QOQ% Index Index
==============================================================
Date of Release 10/29 10/29 10/29 10/29
Observation Period 3Q A 3Q A Oct. Oct. F
--------------------------------------------------------------
Median 2.0% 2.5% 58.0 68.0
Average 2.1% 2.5% 57.7 68.2
High Forecast 3.6% 3.1% 62.6 70.0
Low Forecast 0.5% 2.0% 52.6 67.0
Number of Participants 83 35 60 63
Previous 1.7% 2.2% 60.4 67.9
--------------------------------------------------------------
4CAST Ltd. 1.7% --- 58.7 69.0
ABN Amro Inc. 2.3% --- 57.0 68.5
Action Economics 2.0% 2.3% 58.0 68.0
Aletti Gestielle SGR 2.6% 2.2% 58.0 68.0
Ameriprise Financial Inc 2.3% 2.0% 58.5 68.5
Banesto 2.1% --- 59.8 68.0
Bank of Tokyo- Mitsubishi 1.7% --- 62.6 69.9
Bantleon Bank AG 2.4% --- 57.0 69.0
Barclays Capital 2.5% 2.5% 57.0 68.0
Bayerische Landesbank 2.0% 2.5% --- 68.2
BBVA 2.1% 2.4% 59.0 68.0
BMO Capital Markets 1.8% --- 58.0 68.0
BNP Paribas 1.5% --- 59.0 67.5
BofA Merrill Lynch Resear 2.5% 2.7% 57.5 68.5
Briefing.com 1.5% --- 58.0 67.0
Capital Economics 3.0% 2.8% --- 67.9
CIBC World Markets 2.0% --- --- ---
Citi 1.9% 2.6% 56.0 67.5
ClearView Economics 2.2% --- 57.0 68.5
Commerzbank AG 1.9% --- 59.0 68.0
Credit Agricole CIB 2.0% 2.6% 57.0 ---
Credit Suisse 2.6% 2.4% 57.0 68.0
Daiwa Securities America 2.2% 2.0% --- ---
DekaBank 2.4% --- 58.0 68.5
Desjardins Group 1.4% --- 57.0 67.9
Deutsche Bank Securities 2.0% --- 58.0 67.9
Deutsche Postbank AG 2.0% --- --- 67.9
DZ Bank 1.8% --- 58.0 68.0
First Trust Advisors 2.9% 2.7% 57.0 68.5
FTN Financial 1.2% --- 61.0 68.0
Goldman, Sachs & Co. 1.5% 3.0% 57.0 ---
Helaba 2.0% --- 57.0 ---
High Frequency Economics 1.6% 2.5% 58.0 ---
HSBC Markets 2.4% --- 56.6 68.5
Hugh Johnson Advisors 2.0% --- 58.0 ---
Ibersecurities 2.2% 2.5% 52.6 ---
IDEAglobal 2.2% 2.3% 59.0 70.0
IHS Global Insight 1.6% 2.6% --- 68.8
Informa Global Markets 1.6% 2.1% 58.5 68.3
ING Financial Markets 2.4% --- 57.0 68.5
Insight Economics 2.5% --- 57.5 68.0
Intesa-SanPaulo 2.3% --- 58.0 68.0
J.P. Morgan Chase 2.2% 2.6% --- 68.5
Janney Montgomery Scott L 1.8% 3.0% --- ---
Jefferies & Co. 2.5% --- 60.0 68.5
Landesbank Berlin 2.2% --- 56.5 68.0
Landesbank BW 2.0% --- 58.0 68.4
Maria Fiorini Ramirez Inc 2.0% --- --- ---
MF Global 2.2% 2.7% 55.0 68.5
MFC Global Investment Man 1.9% 2.2% --- 68.2
Mizuho Securities 0.5% --- 57.0 68.0
Moody’s Analytics 2.2% --- 58.5 68.0
Morgan Keegan & Co. 2.4% --- --- ---
Morgan Stanley & Co. 2.4% 2.6% --- ---
National Bank Financial 2.0% 2.3% --- ---
Natixis 1.6% 2.0% --- ---
Newedge 2.0% --- 57.3 68.2
Nomura Securities Intl. 1.8% 2.4% 58.0 ---
Nord/LB 3.6% --- 58.0 68.0
Pierpont Securities LLC 2.7% 2.4% --- 68.0
PineBridge Investments 2.4% --- 55.0 67.0
PNC Bank 2.1% --- --- ---
Raiffeisen Zentralbank 2.4% --- 56.0 67.9
Raymond James 2.4% --- --- 68.0
RBC Capital Markets 2.0% 2.3% 61.0 69.0
RBS Securities Inc. 2.2% 3.1% --- 67.9
Scotia Capital 1.5% --- --- ---
Societe Generale 2.1% 2.6% 57.6 68.5
Standard Chartered 1.1% 2.0% --- 67.0
State Street Global Markets 2.0% 2.5% 58.4 68.3
Stone & McCarthy Research 2.0% 2.2% 57.4 68.0
TD Securities 1.9% --- 56.0 68.0
Thomson Reuters/IFR 2.3% --- 58.5 68.5
Tullett Prebon 1.8% --- 57.5 68.8
UBS 2.0% 2.6% 57.0 70.0
UniCredit Research 1.7% --- --- ---
Union Investment 2.3% --- --- ---
University of Maryland 2.6% --- 58.4 68.3
Wells Fargo & Co. 1.7% --- --- ---
WestLB AG 1.8% --- 58.0 68.0
Westpac Banking Co. 1.1% --- 55.0 67.5
Woodley Park Research 2.0% --- 56.6 68.3
Wrightson ICAP 2.7% --- 58.0 68.0
==============================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net
US Economy Probably Picked Up Consumer Spending Climbed
Simon Dawson/Bloomberg
Gross domestic product rose at a 2 percent annual pace, up from a 1.7 percent rate in the prior three months, according to the median estimate of 83 economists surveyed by Bloomberg News.
Gross domestic product rose at a 2 percent annual pace, up from a 1.7 percent rate in the prior three months, according to the median estimate of 83 economists surveyed by Bloomberg News. Photographer: Simon Dawson/Bloomberg
Oct. 29 (Bloomberg) -- David Greenlaw, chief fixed-income economist at Morgan Stanley, talks about the outlook for U.S. economic growth, Federal Reserve monetary policy and Treasury yields. Greenlaw speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Oct. 29 (Bloomberg) -- Thomas Herrmann, an economist at Credit Suisse Group AG, talks about the outlook for the U.S. economy and the possibility of quantitative easing by the Federal Reserve. He speaks from Zurich with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Oct. 28 (Bloomberg) -- Joseph Balestrino, a fixed income market strategist at Federated Investors Inc., talks about how large the Federal Reserve's asset purchases are likely to be and the impact of the program on the U.S. economy. Balestrino speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Oct. 29 (Bloomberg) -- Sarah Hewin, a senior economist at Standard Chartered Bank Plc, talks about the outlook for the U.S. economy and quantitative easing. She speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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