Today's Economic Data Highlights
Preliminary GDP for Q3 - the datapoint which Fed members said would be critical in determining QE2, also employment costs, the Chicago purchasing managers’ index, and the final Reuters/Michigan confidence read for October. Most importantly, no POMO today.
8:30: GDP for Q3 (prelim estimate)….not much change? The median forecast is for a slight pickup. The issue, as always, is composition, and on this score the report should be decidedly weak. In particular, we estimate that real final sales rose 0.7% at an annual rate (we have no idea what most others are expecting), with real consumption up about 3% (above the median 2.5%) but residential investment off sharply and business fixed investment rising much more slowly than earlier in the year. The trade balance should continue to widen. If the headline prints higher than we expect, the likely reason will be even more inventory accumulation than the $92bn (5.3% annualized) increase expected, in which case this becomes a negative risk factor for Q4 or Q1. Price indexes should be broadly in line with recent trends, with some slowing in the PCE core index relative to its 1.4% year-to-year trend.
On GDP, GS: +1.5%; median forecast (of 83): +2.0%, ranging from +0.5% to +3.6%; last (Q2 third est) +1.7%.
On the GDP price index, GS: +1.8%; median forecast (of 38): +1.8%, ranging from +1.2% to +2.2%; last: +1.9%.
On the PCE core index: GS: +1.2%; median forecast (of 20): +1.0%, ranging from +0.9% to +1.2%; last: +1.0%.
8:30: Employment cost index for Q3…moderation? Increases in this index stiffened up in the first half of 2010, due mainly to a surge in benefit costs. We look for a slight moderation, but without a great deal of conviction.
GS: +0.4%; median forecast (of 57): +0.5%, ranging from +0.3% to +0.6%; last +0.5%.
9:45: Chicago purchasing managers’ index for Oct…moderation? This index has run stronger than the national ISM manufacturing index in recent months, presumably due to the larger weight that auto-related production has in this region. Most economists expect some moderation, as do we.
GS: 57; median forecast (of 60): 58, ranging from 52.6 to 62.2; last 60.4.
10:00 (9:55 to subscribers): Reuters/University of Michigan consumer sentiment for Oct (final)…slight uptick? The median forecast is essentially on top of the preliminary reading, which is often how the final reading turns out. The median expectation for inflation five to ten years ahead was 2.7% in the preliminary report, the same as in September and at the low end of the tight 2.7%-2.9% range that has prevailed since November 2009.
Median forecast (of 63): 68.0, ranging from 67 to 70; last 67.9 (Oct prelim).
From Goldman Sachs