Economist Lowers Estimates For U.S. GDP Growth

ByJohn S. McClenahen A month from now the U.S. Commerce Department will release its first official estimate of U.S. economic growth for 2002's third calendar quarter. It's likely to show that GDP adjusted for inflation grew at an annual rate of 3% to 3.5% -- perhaps even higher -- in the three months just ending. Merrill Lynch & Co. is estimating third-quarter real GDP growth at a stunning 4.5% rate. However, those confident predictions earlier this year for a banner second half on the way to a full economic recovery from the 2001 recession have been overtaken by recent financial and political events. "Sharp stock market declines and the threat of war [with Iraq] are increasing uncertainty, depressing confidence, widening credit spreads and raising oil prices," notes Bruce Steinberg, Merrill Lynch's chief economist. The securities firm last week lowered its GDP forecasts to just 2.5% growth in this year's final quarter and again in the first quarter of 2003. In the meantime, the U.S. Commerce Department has put out its third and final report on second-quarter 2002 GDP growth. It shows that -- adjusted for inflation -- the U.S. economy grew at an annual rate of 1.3%, two-tenths of a percentage point better than earlier estimates. The revised growth rate was right in line with most economists' expectations.