By Joe Plocek

WASHINGTON (MNI) – Many firms issued lower Q4 GDP estimates on the back of
the morning report that October Personal Consumption declined 0.2%.

Expectations now center on real growth barely reaching +1% in Q4.

J.P. Morgan, one of the more optimistic forecasters, put Q4 real GDP at
+1.5%, 0.2 point lower, and indicated that only some of the weakness reflects
special factors.

JPM economist Michael Feroli, in a research note, said the revision
reflects three factors: “(1) a larger-than-anticipated accumulation of
inventories in Q3, (2) a softer trajectory of final demand and income last
quarter, and (3) soft demand data at the beginning of this quarter.”

Feroli said softer demand reflects in part the hurricane’s destructive
impact but rebuilding could help later. “Sandy may be responsible for a few
tenths of a percent drag on Q4 GDP” and fiscal cliff uncertainties probably also
hurt, he said.

JPM argues the Fed’s case for taking out insurance against a slowdown has
been reinforced and said the Fed may institute outright Treasury purchases after
Operation Twist expires in December.

Economists at RBS said they are marking down their GDP estimates even if
November spending rebounds. They estimate Q4 GDP is tracking +0.9%.

Goldman, Sachs said Q4 GDP is tracking +1.3%. CIBC lowered their Q4 GDP estimate
to +1.2%.

Pierpont Securities economist Steve Stanley wrote that the weak October
income/spending report means Q4 real consumption is running about +1.25% and
that takes his Q4 real GDP estimate down to a mere +0.5%.

Pantheon’s Ian Shepherdson said the October data had “a hit from Sandy” but
underlying spending trends are weak.


–MNI Washington Bureau; tel: +1 202-371-2121; email: