29 Apr 2009
April 29 (Bloomberg) -- The U.S. economy probably plunged again in the first quarter as companies slashed inventories, jobs and spending, economists said before a report today.Gross domestic product dropped at a 4.7 percent annual pace after contracting at a 6.3 percent rate in the last three months of 2008, according to the median estimate of 71 economists surveyed by Bloomberg News. The report is due just as Federal Reserve policy makers begin a second day of meetings.
Smaller stockpiles may set the stage for a return to growth in the second half of the year amid signs Fed efforts to reduce borrowing costs and unclog lending are starting to pay off. The recession persisted even as lower gasoline prices and larger tax refunds helped bring an end to the worst slump in consumer spending in almost three decades.
"While consumer spending picked up, everything else collapsed," said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. "Lower inventories leave room for goods production to expand again."
The Commerce Department figures are due in Washington at 8:30 a.m. Forecasts ranged from declines of 2.8 percent to 8 percent. The fourth-quarter's slide was the worst since 1982.
Consumer spending, which accounts for 70 percent of the economy, probably climbed at a 0.9 percent annual pace in the first three months of the year, the report may show. Purchases dropped at an average 4.1 percent rate in the last half of 2008, the biggest slide since 1980.
Longest Recession
Should the economy shrink again this quarter as projected by economists surveyed this month by Bloomberg, the recession that began in December 2007 would be the longest since the Great Depression.
Recent announcements by companies including General Motors Corp. indicate that will be the case. GM last week said it will idle 13 U.S. assembly plants for multiple weeks to trim production by 190,000 vehicles from May through July. Sales in its home market fell 49 percent this year through March.
General Motors and Chrysler LLC are threatened with bankruptcy as sales have plummeted since credit markets seized last year.
Still, data in recent weeks, including signs of stability in home sales, residential construction and consumer confidence, signal the world's largest economy may shrink at a slower pace.
Part of the improvement may be due to government efforts to stem the recession. In its last meeting on March 18, the Fed pledged to double mortgage-debt purchases to $1.45 trillion and buy as much as $300 billion in long-term Treasuries. That's helped bring down rates on mortgages and auto loans.
Fed Statement
The central bank's statement today, due at around 2:15 p.m., may acknowledge that the pace of economic decline has moderated in the past six weeks and may reiterate it will keep the benchmark rate low for an extended period and continue to boost its balance sheet to revive lending.
Ford Motor Co., working to avoid a federal bailout, is among companies seeing some improvement. The automaker last week posted a first-quarter loss that beat analysts' estimates.
"We're not quite sure where the bottom is," Ford's Chief Executive Officer Alan Mulally said in an April 24 Bloomberg Television interview. "But we believe with the stabilization of the banks, freeing up the credit, and the stimulus packages we have, both monetary and fiscal, that we're going to see an uptick in the third and fourth quarter."
Declines in business investment joined falling inventories in dragging down the GDP last quarter, economists said. The drop in stockpiles may be the biggest since quarterly records began in 1990, according to a forecast by economists at Barclays Capital Inc. in New York.
The gain in consumer spending and a smaller trade deficit as imports plunged prevented the economy from shrinking even more, economists said.
Bloomberg Survey
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GDP Personal GDP Core PCE
Annual Consump. Prices Prices
QOQ% QOQ% QOQ% QOQ%
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Date of Release 04/29 04/29 04/29 04/29
Observation Period 1Q A 1Q A 1Q A 1Q A
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Median -4.7% 0.9% 1.8% 1.0%
Average -4.8% 0.8% 1.7% 1.2%
High Forecast -2.8% 1.5% 3.3% 1.7%
Low Forecast -8.0% 0.2% -0.4% 0.7%
Number of Participants 71 8 32 10
Previous -6.3% -4.3% 0.5% 0.9%
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4CAST Ltd. -5.3% --- --- 1.6%
Action Economics -5.0% --- 3.1% ---
AIG Investments -3.5% --- --- ---
Aletti Gestielle SGR -4.0% 0.9% 1.8% 1.7%
Ameriprise Financial Inc -3.3% 0.8% 1.8% 0.8%
Argus Research Corp. -5.3% --- 2.1% ---
Bank of Tokyo- Mitsubishi -4.0% --- 1.6% ---
Bantleon Bank AG -4.5% --- --- ---
Barclays Capital -5.5% --- 2.0% ---
BBVA -4.7% --- --- ---
BMO Capital Markets -4.2% --- 0.4% ---
BNP Paribas -4.0% --- -0.4% ---
Briefing.com -4.0% --- 1.7% ---
Calyon -4.9% 0.9% 1.8% ---
CIBC World Markets -5.7% --- 1.8% ---
Citi -5.2% --- 3.0% ---
ClearView Economics -6.2% --- 0.6% 0.9%
Commerzbank AG -6.0% --- --- ---
Credit Suisse -5.5% --- 1.8% ---
Daiwa Securities America -5.2% --- 2.5% ---
Danske Bank -4.7% --- 1.6% ---
DekaBank -4.7% --- 1.8% ---
Desjardins Group -4.4% --- --- ---
Deutsche Bank Securities -8.0% --- 1.5% ---
Deutsche Postbank AG -5.5% --- --- ---
DZ Bank -4.0% --- --- ---
First Trust Advisors -4.2% --- 1.2% ---
Fortis -4.4% --- --- ---
FTN Financial -5.0% --- --- ---
Goldman, Sachs & Co. -5.7% --- 2.1% 0.7%
Helaba -5.0% --- --- ---
Herrmann Forecasting -4.8% 1.1% 3.3% 1.7%
High Frequency Economics -3.0% 0.7% --- 1.0%
HSBC Markets -4.5% --- --- ---
IDEAglobal -3.5% 0.6% 0.5% ---
IHS Global Insight -6.5% --- --- ---
Informa Global Markets -4.5% --- --- ---
ING Financial Markets -3.5% --- --- ---
Intesa-SanPaulo -5.2% --- --- ---
J.P. Morgan Chase -4.5% --- 2.5% ---
Janney Montgomery Scott L -4.4% 0.2% --- 0.9%
Landesbank Berlin -5.0% --- --- ---
Landesbank BW -4.5% --- --- ---
Lloyds TSB -5.0% --- --- 0.9%
Maria Fiorini Ramirez Inc -5.4% --- --- ---
Merrill Lynch -5.5% --- 2.9% ---
Mizuho Securities -5.3% --- --- ---
Moody's Economy.com -4.3% --- --- ---
Morgan Keegan & Co. -5.6% --- 1.6% ---
Morgan Stanley & Co. -5.2% --- --- ---
National Bank Financial -4.6% --- --- ---
Natixis -5.1% --- --- ---
Newedge -4.0% 1.5% --- ---
Nomura Securities Intl. -4.3% --- 2.5% ---
PNC Bank -5.0% --- 1.5% ---
Raymond James -4.0% --- --- ---
RBS Securities Inc. -2.8% --- --- ---
Ried, Thunberg & Co. -5.5% --- --- ---
Schneider Foreign Exchang -4.7% --- --- ---
Scotia Capital -5.5% --- 0.6% ---
Societe Generale -5.0% --- --- ---
Stone & McCarthy Research -4.0% --- 1.6% ---
TD Securities -5.3% --- --- ---
UBS Securities LLC -4.5% --- 1.8% ---
Unicredit MIB -4.5% --- --- ---
University of Maryland -5.5% --- 0.8% 1.5%
Wachovia Corp. -4.0% --- --- ---
Wells Fargo & Co. -4.6% --- 1.3% ---
WestLB AG -3.8% --- --- ---
Westpac Banking Co. -5.0% --- --- ---
Wrightson Associates -5.5% --- --- ---
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