Investors Focus on GDP, Claims and End of Quarter

The third read on fourth quarter GDP would normally be a ho hum event, but Thursday’s report could contain some important insights about first quarter growth.

Map of United States and North America
Adam Gault | OJO | Getty Images
Map of United States and North America

Economists are looking to see what kind of revisions will show up in personal consumption, and then whether that could spill into the February personal consumption number, released Friday.

There is also important weekly jobless claims data, at 8:30 a.m. ET, and a 1 p.m. auction of $29 billion in 7-year notes.

Fed Chairman Ben Bernanke is back in class, scheduled to give his final lecture at George Washington at 12:45 p.m. ET, and Philadelphia Fed President Charles Plosser speaks at 1 p.m. on the economy, in Wilmington, Del. Richmond Fed President Jeffrey Lacker speaks at 10:30 a.m. ET.

“If GDP is revised up in the fourth quarter, and I think it will be that makes it, at the margins, even more impressive that the economy was able to recover in the second half of last year, given all the shocks it faced,” said Deutsche Bank chief U.S. economist Joseph LaVorgna. He expects fourth-quarter GDP to come in at 3.3 percent, up from 3 percent.

“Assuming we get this revision to consumption that will effectively give us a better lift off point for the first quarter, my guess is when we get Friday’s data on February consumption that you’ll see not just an increase in February personal consumption, but you’ll probably see an increase in December and January (revisions),” he said. He expects a 0.4 percent increase in the fourth-quarter consumption number. LaVorgna currently expects first quarter growth of 2.8 percent.

Nomura economists were also expecting an increase in fourth-quarter GDP, to an above consensus 3.5 percent. “We think that there are some upside risks to our forecast. As a result, we think the full-year real GDP growth for 2011 might also be revised up by one-tenth to 1.8 percent from 1.7 percent,” according to a note. They are also looking to Friday’s personal consumption data to see if it signals stronger first quarter growth.

LaVorgna expects jobless claims of 350,000. “Something that shows a grinding improvement will remain in place,” he said, adding that last year and the year before claims became more elevated in April. “It will be very important to see if claims can sustain this deceleration,” he said.

Stocks wobbled Wednesday, with the Dow down 71 at 13,126, and the S&P 500 off 6 to 1,405. Traders have said there could be more selling, amid talk that asset allocators are rebalancing after the first quarter’s strong stock market gains, by selling stocks and increasing bond holdings. Stocks are on track for the best first quarter since 1998.

But doubts about global growth sent a round of jitters into equities markets Wednesday, after an overnight sell off in Shanghai stocks on concerns about Chinese growth. Copper was weak, and stocks were led lower by basic materials and energy shares. A weaker than expected U.S. durable goods report added to the negative tone. Caterpillar , a global growth bellwether, slumped in heavy trading.

There is also increasing focus on Europe, where finance ministers will be tackling the reshaping of the European bailout funds at the end of the week, and Spain will put forth a budget.

Earnings reports are expected from Best Buy and Shaw Group before the opening bell Thursday, while Blackberry maker Research in Motion and Tibco report after the bell.

Follow Patti Domm on Twitter: @pattidomm

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