Wednesday brings the final read on Q3 GDP--economists are looking for an increase to 2.8% growth

12/21/2010 2:21 pm EST


Jim Jubak

Founder and Editor,

No holiday from economic data this week.

Wednesday brings what’s called the final revision of third quarter U.S. GDP growth estimates. (We’ll get the final, final figure in 2011.)

The previous estimated came in at 2.5% growth, itself an increase from the first estimate. Economists project that Wednesday’s revision will bring the growth rate up to 2.8% for the quarter that ended in September.

Why are the practitioners of the dismal science confident of an increase in the growth rate?

Let me count the reasons: More optimism from purchasing managers surveys, a strong upward revision to September retail sales, and higher than expected growth in U.S. exports.

Even though Wednesday’s numbers are a revision of past data, they will have an influence on stocks going forward. An increase in third quarter growth to 2.8% will add to optimism on Wall Street about growth in the fourth quarter and for 2011. In the aftermath of the extension of the Bush tax cuts Wall Street economists have been busy raising their estimates for 2011 growth to 3% or even 3.5% for the year.

It would take at least a modest surprise from third quarter GDP growth to move up those figures for 2011 again, but 2.8% growth would confirm the optimism behind those projections for 2011. And that would be worth something to U.S. stocks.
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