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Fourth quarter GDP could show economy entered a slower growth patch at year-end – CNBC

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Economic growth in the final quarter of the year is expected to be on par with the third quarter’s 2.1%, but it is also likely to herald the start of a slower trend that could continue through the first half of this year.

Fourth quarter growth is expected to have been 2.1%, according to Dow Jones. But there’s a wide range of forecasts for the first reading — from 1.4% at JPMorgan to 2.5% by Amherst Pierpont.

Markets turn their focus to gross domestic product data, expected at 8:30 a.m. ET Thursday, after the Federal Reserve’s meeting on Wednesday provided little new insight into Fed rate policy. The Fed did make it clear that it sees a more moderate consumer, which should show up in the softer consumption number in GDP.

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On Wednesday, the Commerce Department reported that the U.S. goods trade deficit rose sharply in December as imports rebounded and businesses were more wary about accumulating inventory. The goods trade gap, which has fallen for three straight months due to declining imports, surged 8.5% to $68.3 billion last month.

That prompted some economists to trim fourth quarter growth forecasts. Goldman Sachs economists, for instance, sliced their forecast for growth by one tenth to 1.8%.

“The trade war between China and the U.S. is over for now, but the trade deficit red ink remains, which makes markets scratch their heads and wonder what that was all about,” notes Chris Rupkey, chief economist at MUFG Union Bank.

Rupkey said the surprise jump in the trade gap now has made it a toss up for whether growth will be above or below 2%.

“The trade deficit is still there. The trade deal didn’t fix,” said Diane Swonk, chief economist at Grant Thornton. Swonk expects fourth quarter growth at about 1.7% and said the economy is sliding into a softer period for a number of reasons.

“It’s exacerbated by the cuts at Boeing, a slower consumer and persistently weak business investment,” she said. “We ended on a weak note at the end of the year and that’s going to show up in the data.” The Boeing cuts in production should not have an impact on GDP until the first quarter.

The wide range of forecasts for fourth quarter GDP growth could make for some market volatility around the official reading when it is released Thursday. The median forecast for Q4 GDP growth is also 2.1% in the CNBC/Moody’s Analytics Rapid Update survey of economists.

Jonathan Millar, U.S. economist at Barclays, expects 2% growth, and he says one of the issues forecasters are facing is the impact of volatile oil prices, which rose through most of the fourth quarter.

“One thing to keep an eye on is inventories. Inventory data can be complicated at times when oil prices are moving around a lot. It’s an accounting thing, when there’s a change in the valuation of inventories,” he said. “The book values reported by firms may understate the amount inventories are going up. The stuff that’s flowing in costs more than the stuff that’s flowing out. That distorts the numbers.”

Rupkey noted the $5.3 billion widening in the December goods deficit occurred as imports of industrial supplies rose $3.8 billion to $44.6 billion. He said that industrial supplies includes includes petroleum and petroleum products, and “petro-imports may sink back with the price of crude oil in the coming months.”

Millar said he expects to see a downturn in first quarter growth to a pace of 1.5%, based on Boeing’s production cuts following troubles with the Boeing 737 Max. Boeing and the ripple effect to other businesses will knock an estimated half percentage point off of growth in the first quarter. It’s also unclear what if any impact the coronavirus might have on global growth in the first quarter.

The second quarter should be slightly better at 2%, but then third quarter could spring back once Boeing is back on line, at 2.5%, he said.

As for the fourth quarter, the consumer pulled back, even though it was holiday shopping season. “You had consumer spending at 3.2% in Q3. I have consumers spending slowing in Q4, growing at about 2.8%,” said Ward McCarthy, chief financial economist at Jefferies.

Fourth quarter growth is in line with the third quarter, and also the second quarter, of 2%, but off from the first quarter’s 3.1%.

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No, Britain’s Economy Isn’t On The Rocks. – Forbes

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How bad is Britain’s economy?

It depends on what you read.

For instance, the Atlantic magazine headlined a recent feature “How the U.K. Became One of the Poorest Countries in Western Europe.”

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The features continues with the following: “The U.K. is now an object lesson for other countries dealing with a dark triad of deindustrialization, degrowth, and denigration of foreigners.”

In other words, the Atlantic has some pretty brutal thoughts on the U.K.’s economy.

Unfortunately, none of that reflects the reality I have lived and the economic data.

Let’s start with some basics.

UK Post-pandemic Growth Shines

First up is inflation-adjusted GDP since the beginning of 2021. In that case, the UK leads the pack of the three largest European economies. It grew 7.4% last year following by 3.6% this year, according to data from the International Monetary Fund.

Contrast that with France which grew 6.8% last year and 2.5% this year, then Germany which limped along at 2.6% in 2021 and 1.5% so far this year.

It shouldn’t take a PhD in mathematics to see that the UK is growing faster than the others over that period. Its not a huge difference in the case of France, but still its not like Britain is a basket case.

Fewer Jobless

UK unemployment is also far lower than either France or Germany. Britain’s jobless rate is a mere 3.6%, according to TradingEconomics. That compares with 5.5% and 7.3% for Germany and France respectively.

Some observers say the UK’s rate is so low because many people have stopped looking for work. Its a fair point, but only at the margin. In other words, its a relatively small issue. People who aren’t looking for work can hardly be unemployed. Second, if the UK rate was adjusted for the lower participation its hard to see the jobless figures jump to the current levels in France or Germany.

Modest Debt

Despite claims to the contrary that cutting taxes would send an already-indebted country into economic oblivion, the U.K. could probably afford to borrow bit more cash.

That’s because there’s massive hole in the assertion that Britain is in hock up to its eyeballs, its plainly wrong, especially compared to other rich countries.

The UK’s debt-to-GDP ratio is around 97%, again according to TradingEconomics. However, for France the figure is 113%, and the U.S. is 137%. Germany stands out at 69%.

In other words, the U.S. (generally considered to be a strong economy,) and France (a bedrock economy of the European Union) are much more in debt than Britain and yet observers seem excited to bash the U.K. like it was going out of fashion.

Germany does have a better debt ratio, but it is also a country that spends proportionately far less on defense than the other comparison countries. That’s something that the world has scrutinized closely since the invasion of Ukraine on February 24.

Illegal Migrants

However, perhaps the trump card in demonstrating the strength of the UK’s economy is the wave of illegal migration into the country.

Wave may understate the matter.

Its more of a tsunami.

This year so far more than 40,000 people have made the life-threatening journey across the channel from France to England. That’s up from less than 30,000 last year, and under 10,000 in 2020. Many of the people who make that journey get granted refugee status.

When considering this information its important to understand that migrants are leaving a democratic country will at top notch record on human rights and with a strong economy. Its also worth remembering that France has better weather than the U.K., and finer food.

It’s the Economy, Stupid

So why would so many people risk their lives crossing by far the world’s busiest shipping lane at night in a rubber dinghy to get to Britain? People can and do die on that trip with banal regularity.

Maybe they really do like the abundant grey skies, and drizzle that the country has to offer. Perhaps they really like British food in the way a native enjoys them.

But what about this: There’s a chance that the U.K.’s market driven economy is attractive to people in a similar way that America is attractive to migrants of all types.

On top of that, the Atlantic is wrong about Britons not liking foreigners. In fact, the U.K. population embraces people from all over the world.

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India's Economic Ascendance Might Just Happen This Time: New Economy Saturday – Bloomberg

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India’s Economic Ascendance Might Just Happen This Time: New Economy Saturday  Bloomberg



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Your Weekend Reading: A Global Economy Awash With Mixed Signals – Bloomberg

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Your Weekend Reading: A Global Economy Awash With Mixed Signals  Bloomberg



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