2009 Economic Calendar
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Released On 10/29/2009 8:30:00 AM For Q3(a):2009
PriorConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR-0.7 %3.0 %2.0 % to 4.0 %3.5 %
GDP price index - Q/Q change - SAAR0.0 %1.4 %0.3 % to 2.3 %0.8 %

Today's moderate increase for third quarter GDP should provide some psychological lift for consumers and businesses since it is the first positive growth for the overall economy in just over a year. And financial markets are likely to like it since it is all about expectations and the advance estimate topped expectations. Real GDP in the third quarter rebounded an annualized 3.5 percent, after declining by only 0.7 percent in the second quarter. The third quarter boost came in above the market consensus for a 3.0 percent increase.

The improvement in real GDP in the third quarter primarily reflected upturns in personal consumption, inventory investment, exports, and residential fixed investment and a smaller decrease in nonresidential fixed investment that were partly offset by rise in imports, a downturn in state and local government spending, and a deceleration in federal government spending.

Indeed, some of the component numbers were encouraging. PCEs rose an annualized 3.4 percent, led by durables with a 22.3 percent jump. Residential investment made a partial rebound of 23.4 percent-the first gain since a 2.6 percent rise in the second quarter of 2006. Inventories did add to third quarter growth but the "increase" was actually less of a decline in the change in inventories. Businesses are still facing lean inventories and any rise in demand could boost production for inventories. Both exports and imports were up after a string of negative quarters for both.

Cash for clunkers did add substantially to third quarter growth as motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.

Year-on-year, real GDP improved to down 2.3 percent from minus 3.8 percent in the second quarter.

Inflation is still subdued as the GDP price index edged up 0.8 percent, following no change in the second quarter. The consensus had projected a 1.4 percent rise in the latest period.

Today's report should be a positive for equities, possibly damping the view that stocks are in a correction.

Consensus Outlook
GDP was still barely in negative territory in the second quarter with the Commerce Department nudging up its third estimate to an annualized 0.7 percent decrease from the previous estimate of a 1.0 percent decline. Final sales were revised to be more positive at an annualized 0.7 percent gain in the second quarter, compared to the second estimate of a 0.4 percent gain. On the inflation front, the GDP price index was flat for the quarter. Looking ahead, traders are expecting the advance estimate for third quarter GDP to clearly establish that the economy was in recovery in the third quarter. The big question is by how much. Since this release is expected to show the first positive GDP growth since the second quarter of 2008, this report will get heightened attention.

Gross Domestic Product represents the total value of the country's production during the period and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Data are available in nominal and real (inflation-adjusted) dollars, as well as in index form. Economists and market players always monitor the real growth rates generated by the GDP quantity index or the real dollar value. The quantity index measures inflation-adjusted activity, but we are more accustomed to looking at dollar values.

Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.

Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.

The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.  Why Investors Care
Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable.
Data Source: Haver Analytics
It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics

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