By Timothy R. Homan
Oct. 29 (Bloomberg) -- The U.S. economy probably grew in the third quarter for the first time in more than a year, driven by gains in consumer and government spending that have failed to reduce unemployment.
The world’s largest economy expanded at a 3.2 percent annual pace from July through September after shrinking in the previous four quarters, according to the median estimate of 79 economists surveyed by Bloomberg News. Household purchases likely rose by the most since the first three months of 2007.
Policy makers will now focus on whether the recovery, buoyed by federal assistance to the housing and auto industries, can be sustained into next year and create jobs. The record $1.4 trillion budget deficit limits President Barack Obama’s ability to provide further stimulus, while Federal Reserve officials are trying to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation.
“At this stage the numbers are just going to tell you the recession is over, and now the argument is going to center on the speed of the recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “There will be a lot of naysayers after the numbers because ‘cash for clunkers’ did figure prominently in the quarter’s bounce back.”
The Commerce Department’s report on gross domestic product is due at 8:30 a.m. in Washington. The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades.
Consumers Spend
Consumer spending, which comprises about 70 percent of the economy, probably rose last quarter at a 3.1 percent annual rate from the previous three months, the report may show according to the survey median.
Much of the boost in purchases was provided by the administration’s auto-incentive program known as cash for clunkers, which offered buyers payments of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan, which ended in August, boosted sales by about 700,000 vehicles, according to a Transportation Department estimate.
The improving global economy helped companies from Amazon.com Inc. to Whirlpool Corp. exceed analysts’ sales estimates last quarter. Profits at about 85 percent of the companies in the Standard & Poor’s 500 Index that have released results beat expectations, according to Bloomberg data. That marks the highest proportion in records going back to 1993. The S&P 500 closed at a one-year high on Oct. 19.
Fewer Stockpiles
Growing demand caused inventories to keep falling, which may prompt companies to ramp up production in the coming months and contribute to growth. The drawdown will restrain today’s GDP numbers, economists said.
Orders for durable goods rose 1 percent in September, the Commerce Department said yesterday. The gain was the fourth in the last six months and indicates companies are planning to invest in new equipment.
“You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” Chief Financial Officer Thomas Szkutak of Amazon.com, the world’s largest Internet retailer, said on an Oct. 22 conference call.
The White House’s Council of Economic Advisers estimates the stimulus program, signed into law by President Obama in February, boosted economic growth by 2 percentage points to 3 percentage points in the second quarter, by 3 points to 4 points last quarter and has prevented payrolls from falling even more.
Mounting Unemployment
In September, the unemployment rate reached a 26-year high of 9.8 percent, up from 7.6 percent from when Obama took office in January, figures from the Labor Department show. Economists project the jobless rate will exceed 10 percent by early 2010.
Since the recession began in December 2007, the U.S. has lost 7.2 million jobs. Payroll cuts peaked at 741,000 in January and slowed to 201,000 in August before accelerating again last month.
A report today from the Labor Department, also at 8:30 a.m., may show the number of Americans filing for jobless benefits decreased to 523,000 last week from 531,000 a week earlier, according to the median estimate in a Bloomberg survey.
The economy will likely grow at a 2.4 percent annual rate from October through December, the median forecast in a survey earlier this month showed. GDP will also grow 2.4 percent next year and 2.8 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades.
Bloomberg Survey
===============================================================
Initial GDP Personal GDP
Claims Annual Consump. Prices
,000’s QOQ% QOQ% QOQ%
===============================================================
Date of Release 10/29 10/29 10/29 10/29
Observation Period 24-Oct 2Q A 2Q A 2Q A
---------------------------------------------------------------
Median 523 3.2% 3.1% 1.4%
Average 523 3.3% 2.7% 1.4%
High Forecast 540 4.8% 3.5% 2.3%
Low Forecast 515 2.0% -0.4% 0.3%
Number of Participants 42 79 20 45
Previous 531 -0.7% -0.9% 0.0%
---------------------------------------------------------------
4CAST Ltd. 520 2.5% --- 1.2%
Action Economics 525 2.2% --- 0.8%
Aletti Gestielle SGR --- 3.7% 3.0% 1.9%
Ameriprise Financial Inc 515 3.1% 2.4% 1.3%
Argus Research Corp. --- 4.0% --- 2.2%
Banesto 532 3.4% --- ---
Bank of Tokyo- Mitsubishi 525 2.8% --- 2.0%
Bantleon Bank AG --- 3.0% --- ---
Barclays Capital 525 3.5% --- 1.3%
Bayerische Landesbank --- 3.0% --- ---
BBVA 527 4.1% --- 0.8%
BMO Capital Markets 515 3.8% --- 2.2%
BNP Paribas 521 2.7% --- 1.4%
BofA Merrill Lynch Resear 520 2.5% --- 0.9%
Briefing.com 520 2.5% --- 1.3%
C I T I C Securities --- 3.8% --- ---
Calyon --- 3.4% 3.1% 1.2%
Capital Economics --- 4.2% --- ---
CIBC World Markets --- 3.8% --- 1.7%
Citi 525 3.3% 3.2% 1.0%
ClearView Economics --- 3.4% --- 1.5%
Commerzbank AG 525 --- --- ---
Credit Suisse 530 3.6% 3.1% 1.8%
Daiwa Securities America --- 3.0% --- 1.0%
Danske Bank --- 4.0% 3.2% ---
DekaBank --- 3.3% --- 2.0%
Desjardins Group --- 2.5% --- ---
Deutsche Bank Securities --- 4.0% --- 1.7%
Deutsche Postbank AG --- 3.0% -0.4% ---
DZ Bank --- 3.0% --- 1.5%
First Trust Advisors 529 3.9% --- 2.3%
Fortis --- 2.8% --- ---
FTN Financial --- 3.8% --- ---
Goldman, Sachs & Co. --- 2.7% --- 1.6%
Helaba 520 4.8% --- ---
Herrmann Forecasting 527 2.9% 3.3% 1.2%
High Frequency Economics 520 3.7% 3.2% 2.0%
HSBC Markets 525 4.0% --- ---
Ibersecurities --- 3.3% 0.6% ---
IDEAglobal 515 3.5% 2.8% 1.2%
IHS Global Insight --- 4.3% --- ---
Informa Global Markets 525 4.5% 3.3% ---
ING Financial Markets 520 3.5% 3.2% ---
Insight Economics 525 3.0% --- 1.5%
Intesa-SanPaulo --- 3.2% --- ---
J.P. Morgan Chase 520 3.5% --- 0.6%
Janney Montgomery Scott L --- 2.9% 2.8% 1.3%
Jefferies & Co. --- 3.0% --- 1.3%
Landesbank Berlin 525 3.9% --- ---
Landesbank BW --- 2.6% --- ---
Maria Fiorini Ramirez Inc 535 3.0% --- 2.0%
MFC Global Investment Man 515 3.0% 1.8% 1.5%
Mizuho Securities 540 2.0% --- ---
Moody’s Economy.com 520 3.2% --- 1.2%
Morgan Keegan & Co. --- 2.7% --- 1.4%
Morgan Stanley & Co. --- 3.9% --- ---
National Bank Financial --- 3.8% 3.0% ---
Natixis --- 3.0% 3.5% 0.3%
Newedge --- 2.8% --- ---
Nomura Securities Intl. --- 3.0% --- 0.8%
Nord/LB 525 3.2% --- 1.5%
PNC Bank --- 3.0% --- 1.0%
RBC Capital Markets --- 2.6% 2.5% ---
RBS Securities Inc. 525 3.4% --- 0.9%
Ried, Thunberg & Co. 515 3.0% --- ---
Schneider Foreign Exchang 518 3.2% --- ---
Scotia Capital 525 3.3% --- 0.5%
Societe Generale --- 3.0% --- 1.7%
Standard Chartered --- 3.0% 3.0% 2.2%
Stone & McCarthy Research 530 3.5% --- 1.6%
TD Securities 520 3.8% --- ---
Thomson Reuters/IFR 525 2.8% --- ---
UBS 520 3.5% 3.2% 1.5%
UniCredit Research 520 3.8% --- ---
University of Maryland 520 2.0% --- 0.8%
Wells Fargo & Co. --- 3.7% --- ---
WestLB AG --- 3.1% --- ---
Westpac Banking Co. 520 2.3% --- ---
Woodley Park Research --- 3.5% --- ---
Wrightson Associates 515 3.0% --- ---
===============================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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