3Q GDP Surprises Slightly on the Upside; Predictions of ‘Frankenstorm’ Aftereffects; Wall Street Stagnant Friday
- Oct 29, 2012
The Bureau of Economic Analysis reported on Friday that U.S. real gross domestic product increased at an annualized rate of 2 percent during the third quarter. That was more than most economists had been predicting — 1.8 percent was a common estimate — and more than the second-quarter annualized GDP growth rate of 1.3 percent.
Consumers were consuming more, for one thing, with spending in that sector up 2 percent for the quarter. Also adding to the increase in real GDP was the recovery in the housing market, as well as an uptick in federal government spending. Still acting as drags on GDP growth are exports, commercial real estate spending, and the reluctance among businesses to increase inventories or make capital investments. Imports, which are a subtraction from GDP, decreased.
The contribution from the housing market — which the government terms “residential fixed investment” — was particularly strong. Residential investment was up at an annualized 14.4 percent during the third quarter, compared with an increase of 8.5 percent during the second quarter.
Sandy to be a Costly Storm?
Early on Monday morning, as the late-season Hurricane Sandy (journalist nickname: “Frankenstorm”) was bearing down on the East Coast of the United States, predictions were already being made about how the storm would affect the economy, even beyond the areas where it’s expected to bring strong winds and heavy rain and maybe even snow. Some estimates are putting potential damages from the storm at more than the $15 billion caused by Hurricane Irene in 2011, but at this point, such calculations are still informed guesswork, considering hurricanes’ mercurial natures. Also, economists and other observers do not agree on the impact of such a storm on the entire U.S. economy.
Another consideration is how the storm might affect gasoline production. The Philadelphia area, along with New Jersey and Delaware, are home to a concentration of oil refineries that can produce 1.2 million barrels a day of gasoline or distillates, which includes diesel and jet fuel. (By comparison, total U.S. refinery capacity is about 17.2 million barrels per day, according to the latest figures from the Energy Information Agency.)
Gasoline futures jumped ahead of the storm, but — like Sandy’s impact on the wider economy — prognostications on the impact of gas prices even in the mid-Atlantic and New England are still guesswork. Supply may well go down for a few days, but so will demand, as the storm and its aftermath cuts into driving in the affected areas. So far this month, broader trends, such as a drop in the price of crude oil on international markets, have driven the price of gas down in the United States.
Wall Street Barely Moved on Friday, Waits for Storm on Monday
Wall Street had a lackluster day on Friday, declining in the morning, but clawing its way back to the break-even point by the end of the day. The Dow Jones Industrial Average ending a scant 3.53 points up, or 0.03 percent, while the Nasdaq gained 0.06 percent. The S&P 500 was off 0.07 percent.
On Monday, the New York Stock Exchange trading floor will be closed for the first time in more than a quarter century because of the weather. But this is the 21st century: electronic trading will continue unabated and, in fact, this will mark the first time that NYSE trading has been entirely electronic.