By Drew Pierson
WASHINGTON (MNI) – Reduced inventories are likely to cause a slight
downward revision to the second estimate of Q1 GDP, economists told MNI
on Wednesday.
The advance estimate of Q1 GDP growth in late April was 2.2%, which
is expected to be revised down to 1.9%, according to the median forecast
in an MNI survey.
Analysts expect the second estimate of the price index to remain
the same as the initial estimate of +1.5%.
Jonathan Basile, an economist for Credit Suisse, said he was
projecting a downward revision to 1.9%, dragged down by inventories.
In the advance Q1 estimate, private inventories added 0.59% to the
first-quarter change after adding 1.81% to Q4, according to the
Department of Commerce.
Avery Shenfeld, chief U.S. economist for CIBC World Markets, said
he also expected a downward revision caused in part by inventories, but
was more bullish, projecting a drop to only 2.1% because of shipments
data that Shenfeld said was more encouraging.
Besides inventories, Shenfeld said he was concerned about trade
numbers given recent European stagnation, a sentiment shared by
Nathaniel Karp, chief economist at BBVA.
“I think the key issue is the global economy,” Karp said.
“Obviously the European situation doesn’t help in terms of foreign
trade.”
Karp said he saw non-residential investment in software and
equipment as the largest positive indicators for Q1.
Economists who spoke with MNI said that unless there was any major
revisions in Thursday’s numbers, the situation in Europe, as well as
Friday’s payroll numbers, would likely quickly eclipse discussions about
GDP.
“To some extent, even if it ends up being a hair below 2%, it’ll be
water under the bridge,” Shenfeld said. “It would take a big downward
revision (to rattle investors) given other situations the markets are
worried about.”
The second estimate of Q1 GDP will be released Thursday at 8:30
a.m. ET by the Department of Commerce.
— Drew Pierson is a Washington reporter for Need to Know News
** MNI Washington Bureau: 202-371-2121 **
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