Market briefing --- Bob (medium)
Data --- Ellen (slow)
>> welcome back to “world financial report.” i’m bob bowden, recapping the day on wall street that was friday. a mixed market with the dow and s&p 500 up about .25%, the dow finishing at 10027, s&p at 1130 and the nasdaq at 1975. u.s. economic growth in the third quarter came in slower than expected as rising oil prices contributed to a record trade deficit and companies added less to inventories. ellen braitman spoke with dave malpass with bear stearns and asked him about the data.
>> the bloomberg consensus range went from 2.8 to 5.5. i don’t think we were in the top five of the forecasters looking for g.d.p. growth. so there’s quite a bit of uncertainty in the number. what we learned from today’s number that we didn’t have in our expectations was that the residential investment was particularly weak. also, inventories, the government says, actually declined in september. now, that latter point is good for then october and november. if you had low inventories at the end of september, that can help the growth rate going forward. so i think basically one thing i learned was the hurricane had a bigger negative impact at least in this first release of the g.d.p. number than what i’d been expecting.
>> give us a sense, i hear what you’re saying about business spending inventories expected to pick up in coming months, what about the consumer? what signs do you see from today’s report about what consumer spending will be like through the fourth quarter?
>> consumption growth was 4.6%. that’s a fast pace. i don’t know, i guess triple the pace of growth in the second quarter. i think that that is once again showing that the household balance sheets are in better shape than people think. and also that we’ve had quite a bit of job creation going on in the economy. so i expect the consumer to remain resilient going forward. people look at that savings rate and say it’s very low. it’s an incorrect or misleading measure of what people are actually saving. i see the household balance sheet in pretty good shape and greenspan said that last week.
>> let’s talk about the impact on consumers from oil and i want to talk about it through the prism on the bond market . is the bond market correctly interpreting the implications of the surge in oil?
>> i don’t think that’s what the bond market is telling us in terms of the outlook. the bond market is saying that the fed funds rate is at 1.75% so this is a sharp upslope yield curve, very profit inel and that drags down the yield. i don’t think it has to do with the economic or inflation outlook.
>> what is the inflation outlook from your perspective. a report today said inflation is not a problem.
>> the g.d.p. inflater was low but it wasn’t a good indication of inflation in 1999 and 2000 as we headed into it. i don’t think that’s a very good measure. my expectation is that core c.p.i. will rise over the next year and a half by as much as a percent and a half so we’ll get up towards 3% before we’re done with this inflation bulge. the reason for the bulge is the dollar was weak in 2003 into the first part of 2004 and that pushes prices up.
>> david, what do you expect for fourth-quarter economic growth?
>> we’re looking at 4.6%. again, that’s a range, you know, so could it be 3.5? yes. could it be 5.5? yes. some of the factors strengthening it, remember, we have huge liquidity in corporate and household sectors and the hurricane rebuilding is additive to fourth-quarter g.d.p.
>> that’s david malpass, chief economist with bear stearns. companies are less upbeat on the economy now than they were three months ago according to the latest survey by the national association for business economics. only 15% of companies are somewhat more optimistic about growth in the second half of 2004, down from 41% in the july survey. the surge in oil prices may erode economic growth this year, according to some economists. federal reserve board vice chairman roger furgeson says interest rates can continue to rise at a gradual pace and cites the lingering hessitancy among businesses, the drag on domestic producers from imports and restraints on spending caused by higher energy costs. mr. ferguson is a permanent vote ing member of the federal open market committee. all 46 economists surveyed by bloomberg expect the rate to rise another .25%. the 10-year note gained 6/32, yield heading back down towards 4%. the yield was below 4% as recently as monday of this week, now 4.02% -copper prices soared a day after the chinese government hiked its interest rate and convinced commodity traders the demand may slow from copper. today, we have falling inventory figures from asia, suggesting that chinese demand may still be robust after all.global stockpiles fell to a 14-month low including declines at warehouses in singapore and new orleans. phelps dodge, largest u.s. producer of copper, said china’s copper use will probably increase 12% to 15% this year and prices have gained 46% in the past year. when we return, columbia sports sports wear raised its forecasts and shares jumped. that story is coming up.
