–Updating 14:18 ET Story; Expectations 2.1%

By Kasra Kangarloo

WASHINGTON (MNI) – Friday’s advance report for third quarter U.S.
GDP should slightly brighten the picture for the economic recovery, as a
small improvement from the previous quarter is expected.

According to a survey of economists by Market News International,
GDP is expected to increase 2.1%, after a finalized 1.7% increase in the
second quarter.

Keys to the expected improvement are strong quarterly figures for
personal spending and business investment. Personal spending rose 0.4%
in both July and August, while business investment rose 1.1% in July and
0.6% in August.

The U.S. trade deficit, which accounted for a 3.5 percentage point
reduction of the second quarter’s GDP, has also been lower in the third
quarter.

David Resler, economist at Nomura, set his estimate for Q3 GDP
slightly below consensus at 1.8%, citing weaker consumer spending and
investment data.

“Most of the softness that we think is continuing is due to a
slowdown in business capital spending and residential investment,”
Resler said in a telephone interview.

The advanced report for GDP does exclude a number of important
data, and for this reason the second report is generally considered more
important. Most significant among the data excluded are the September
U.S. trade balance and September personal spending and income, which are
estimated for the initial report.

The economic recovery has appeared stalled heading into the second
half of 2010. The housing market has been anemic, posting low monthly
sales levels without the aid of the expired homebuyers’ tax credit
although the most recent existing home sales report from the National
Association of Realtors Monday posted a higher-than-expected 10%
increase on Monday and new single-family home sales, also for September,
rose 6.6% in Wednesday’s report.

The jobs market has also seen only marginal improvement. Despite
the addition of more than 850,000 private sector jobs in 2010, the
unemployment rate still stands at 9.6%.

— Kasra Kangarloo is a reporter for Need to Know News

** Market News International Washington Bureau: 202-371-2121 **

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