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Goldman Revises Q3 GDP By 50 bps Lower To 3% On Worse Trade Balance

 November 13, 2009 01:30 PM

Too bad America can't be more like China and just determine what the GDP for any given period should be. Of course, it merely needs to become a fully vetted and Comintern recognized communist country (no more of this half-asses sutff) and then it could easily proceed to fully manipulate any and all data releases (even more effectively than it does now). Until then, things are tricky. Like today for example, with the trade numbers coming out and painting an ugly picture for not just import prices but for the "blockbuster" Q3 GDP. Maybe Goldman was wrong in their first GDP estimate. Something tells us Jan Hatzius will be much more correct in his downward GDP revision this time (to 3% from 3.5%), when the next estimate of Q3 GDP comes out, substantially lower than previously thought.

[Related -Gold hasn’t lost its allure in my portfolio]

Wider Deficit Reflects Recovery but Creates Downside for Q3 GDP; Import Price Increases Reflect Dollar and Oil

BOTTOM LINE: Wider-than-expected deficit has expected recovery composition -- large increases in both imports and exports; report suggests modest downside revision to GDP, at least from this source. Import price increases reflect both oil strength and dollar weakness.


Trade balance widens $5.8bn to -$36.5bn in Sep vs GS -$32bn, median forecast -$31.8bn
Import prices +0.7% in Oct (mom, -5.7%yoy) vs median forecast +1.0%.


1. The trade balance was much wider than expected but with a pattern that was essentially consistent with the forecast. In a recovering global economy, one would expect both exports and imports to grow, and with imports exceeding exports for the United States this would widen the deficit. This is exactly what happened in September. Exports rose 2.9% overall (mom, not annualized) and 4.0% for goods; imports surged 5.8% overall and 7.1% in the goods sector. In both cases the September 2009 levels are well below year-earlier levels (down double digits all around).

2. The widening in the balance on goods -- from -$42bn to -$47.6bn -- was more than double what the Commerce Department assumed in its provisional estimate for real GDP growth. Hence, from this source we should expect a modest downward adjustment to the 3.5% annualized increase posted for the third quarter. Coupled with other data, which show a very small downside on balance, the revision is now looking like about 1/2 point or so. We have yet to see retail trade and inventory data, and they could modify this tentative conclusion, perhaps significantly.

3. Although import prices rose less than expected, the increase is noteworthy for the fact that it was not driven primarily by petroleum prices. They rose slightly more than the overall index -- 0.9% vs 0.7% -- but the difference still left prices ex petroleum up 0.7% on the month. Over the past three months, this index has risen 1.4% altogether, presumably due to the cumulative weakening in the dollar during 2009.  Excluding petroleum prices, import prices are still 3.8% below their year-earlier level.



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