Data should show a strong economy, despite a temporary hit from hurricanes

  • The final look at second quarter GDP should show the economy is growing at about 3 percent but economists have ratcheted down third quarter because of the impact of Hurricanes Harvey and Irma.
  • Weekly jobless claims are forecast to remain slightly elevated due to hurricanes.

A third reading of second quarter GDP, which is being reported Thursday, should show that the economy was growing at 3 percent, much higher than the pace of the current quarter, which is being bogged down by the impact of Hurricanes Harvey and Irma.

The 8:30 a.m. ET release of second quarter GDP will be the final look at the data that showed the economy might finally be coming out of a rut of 2 percent growth.

But then hurricanes tore through Texas in late August and Florida in early September, hitting everything from retail sales to industrial production. According to CNBC/Moody's Analytics Rapid Update, economists now expect a median of 2.4 percent for the third quarter.

Barclays chief U.S. economist Michael Gapen expects an even weaker third quarter, pegging growth at just 1.5 percent, but he expects the post-hurricane spring back to start in the fourth quarter.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange (NYSE) in New York.

"We brought fourth quarter up to 3 percent," Gapen said.

The impact of the hurricanes is not expected to slow the Fed, which was a focus in markets Thursday, as traders continued to discuss what they construed as hawkish comments from Fed Chair Janet Yellen Wednesday afternoon.

Treasury yields rose Wednesday, with the 10-year reaching 2.31 percent. Yields also rose on the prospect that the Republican tax plan may require more government spending and borrowing, which would pressure interest rates. Stocks rallied, with banks helping lead gains on the prospect of higher interest rates, which boost profits.

Besides GDP, the advance goods trade balance is due at 8:30 a.m.

There are also jobless claims. The weekly data have been impacted by the hurricanes, surging over the last month as residents of Florida and Texas were unable to get to work. The expectation is for 270,000, but Gapen expects just 250,000 with less impact from hurricanes disrupting workers.

There are Fed speakers Thursday, including Kansas City Fed President Esther George, who speaks at a banking forum at 9:45 a.m. ET, and Fed Vice Chair Stanley Fischer, who speaks at a Bank of England conference at 10 a.m. ET.

Earnings are expected from Accenture, Conagra, Rite Aid and Vail Resorts.

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