Preliminary views of Merrill Lynch's global Chief Economist, Bruce Steinberg, on this morning's US GDP result:
Economics
• In a somewhat surprising development, US Q2 GDP was considerably weaker than expected. GDP grew at only a 1.1 percent rate in the period; we had been anticipating 2.5 percent growth. Consumer and capital spending, while weaker than anticipated, came in broadly in line. The trade balance deteriorated much more than anticipated however, and cut one and three quarters percent from GDP growth in Q2.
• This report also included benchmark revisions to the last three years of economic history. We had expected last year’s recession to show at least two negative quarters; as it is revised it now shows three such negative quarters; Q1, Q2, and Q3 of 2001. Despite these revisions, it still appears to have been probably the most mild recession on a GDP basis in US history, although it is deeper and more closely resembles earlier recessions than it did when viewed from the perspective of earlier data.
• We still anticipate that growth in the second half of the year will be stronger, and will probably average apx. a 3.5 percent rate. In particular, we do not anticipate going forward that the trade deficit will deteriorate in the manner that it did in the first half, and we believe that consumer spending and also hopefully capital spending will be somewhat stronger than was the case in Q2. (B. Steinberg) FlashNote United States 31 July 2002 Investor Support Group Intra-Day Special Call Economics Research Summary
