–Analysts Now Peg GDP Tracking Growth Between 3% and 4%

By Suzanne Cosgrove

CHICAGO (MNI ) – Many analysts Friday raised their estimates for
U.S. fourth-quarter gross domestic product, citing factors that
contributed to the narrowing of the U.S. trade gap in October.

Barclays Capital said its estimate for Q4 real growth is now
tracking 3.5%, Goldman Sachs raised its Q4 tracking estimate by 0.5
point to 3.4% and Nomura lifted its estimate to 3.9% after the Commerce
Department trade deficit report.

“The mix of underlying data that resulted in a narrowing of the
trade gap in October has led us to upwardly revise our tracking estimate
for Q4 real GDP growth to 3.9% from 3.7% previously,” Nomura Global
Economics researchers said in written commentary.

The October trade balance was -$43.5 billion, compared with -$44.2
billion in a revised September total. Imports declined by $2.2 billion
and exports fell by $1.5 billion.

As MNI earlier reported, the drop in imports were almost all
related to oil, comprising a decline of $1.9 billion, or 86% of the
total, as price and volume of imported oil crude fell.

“Although overall net exports of goods declined in October,
Normura researchers noted, demand for capital goods remained strong
with exports of capital goods hitting a record high $42.3 billion and
imports of capital goods also hitting a new record high of $43.6
billion.”

At Barclays Capital, Troy Davig told MNI that it was the real
exports number within the trade data that boosted the firm’s Q4 GDP
tracking estimate to 3.5%, from 3.2%.

Despite the fall in nominal exports, a decline in export prices
implied that real exports increased 1.2% (month over month), Barclays
said.

“Growth slowdowns may be on the way in Europe and China, but you
cannot tell that yet from the U.S. export data,” commented ClearView
Economics’ Ken Mayland. “If the October deficit is sustained for the
rest of the quarter, then the add to GDP would be almost $22 billion, or
0.7 percentage points,” Mayland told MNI.

Taking a more cautious stance, JPMorgan Chase researchers said the
improved trade imbalance “adds upside risk” to their current forecast.

“The net effect of today’s trade report is favorable for
fourth-quarter GDP outcomes,” JPMorgan Chase said in a research note.
“In conjunction with yesterday’s wholesale trade number — which
reported strong stock building in October — this adds upside risk to
our current Q4 GDP call of 3.0%.”

— email: scosgrove@marketnews.com

** Market News International Chicago Bureau: 708-784-1849 **

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