Record Trade Deficit Likely To Lower Estimated GDP Growth

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 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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