jueves, 8 de enero de 2015

jueves, enero 08, 2015
Heard on the Street

Fed’s Journey to Bizarro-World

Combination of Factors Makes Economists’ GDP Forecasts Look Too Low

By Justin Lahart

Jan. 7, 2015 3:51 p.m. ET
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A container is loaded onto a ship in Baltimore. The Commerce Department on Wednesday reported that the trade deficit narrowed to $39 billion in November, and revised October’s deficit figure to $42.25 billion from $43.43 billion. Bloomberg News    


Even as consumers cashed in on lower gasoline prices and hiring strength, economists held that the economy slowed markedly in the fourth quarter. It’s a position that no longer seems tenable.

When forecasting firm Macroeconomic Advisers polled economists before Christmas, pump prices were down sharply, and the holiday shopping season was clearly strong. But the economists forecast fourth-quarter gross domestic product would grow 2.6%, at an annual rate, compared with 5% in the third quarter. To get there, they had to make an important assumption: that the boost the economy got from a pickup in government spending and a narrower trade gap in the third quarter would reverse itself.

The jury is still out on government spending, but the view on trade looks off base: The Commerce Department on Wednesday reported that the trade deficit narrowed to $39 billion in November, and revised October’s deficit figure to $42.25 billion from $43.43 billion.

Much of the decline came from the dropping value of petroleum imports—a consequence of the falling price of oil. But imports of food, capital goods and autos also weakened.

So the view that the narrowing of the trade deficit in the third quarter was somehow “borrowing” from the fourth may have actually got the direction wrong: Perhaps what happened in the third quarter was a response to the widening of the deficit that occurred in the first half.

Whatever the case, economists had to acknowledge after the trade report that their estimates looked too low. J.P. Morgan said fourth-quarter GDP growth looks closer to 3% than its 2.5% estimate. Barclays pushed its estimate to 3.5% from 2.7%.

Such estimates may still be too low. With oil averaging $59.29 a barrel daily in December compared with $75.79 in November, a further narrowing of the trade deficit may be in the offing. And with regular gasoline averaging $2.54 in December versus $2.91 in November, consumer spending may be even more robust than what economists have penciled in.

Indeed, a report from J.C. Penney late on Tuesday suggested that may be the case. The retailer said same-store sales in the nine weeks that ended in December rose 3.7% from a year earlier, at the high end of the 2%-to-4% range it had forecast.

On Monday, auto makers reported that last month was the strongest one for sales since 2006. A daily reading on Americans’ confidence in the economy from polling firm Gallup rose steadily through December.

Meanwhile, as growth goes one way, inflation is going the other, with the drop in gasoline prices looking likely to push the consumer-price index below its year-earlier level within the next month or so.

Falling prices—deflation—and strong growth is the opposite of the stagflation of the 1970s, but there is no term for it. Coldgrowth? Defjam? Groflation? Whatever it’s called, it’s an upside-down sort of world that will complicate the Federal Reserve’s thinking on the timing of an increase in short-term interest rates.

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