Record Trade Deficit Likely To Lower Estimated GDP Growth

Jan. 13, 2005
By John S. McClenahen When it revises its numbers, the U.S. Commerce Dept. could lower its initial estimate of 2.7% inflation-adjusted GDP growth in the third calendar quarter of this year by as much as 26%. So suggests Gerald D. Cohen, a senior ...
ByJohn S. McClenahen When it revises its numbers, the U.S. Commerce Dept. could lower its initial estimate of 2.7% inflation-adjusted GDP growth in the third calendar quarter of this year by as much as 26%. So suggests Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. September's record trade deficit of $34.3 billion will cut four-tenths of a percentage point off Commerce's preliminary number, he calculates. Slower than expected rate of inventory growth is likely to lower the GDP number by another three-tenths of a percentage point, bringing the revised growth figure down to very modest 2%. "If growth remains around 2% for the next few quarters -- though we don't believe it to be the case -- the Fed would likely ease" short-term interest rates," Cohen speculates.

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