What to ex­pect for the Q3 2016 GDP re­port

Financial Mirror (Cyprus) - - FRONT PAGE -

This Fri­day will mark the first real look at third quar­ter GDP. While this is a back­ward­look­ing num­ber, this num­ber is closely watched as it marks the of­fi­cial yard­stick that mea­sures the en­tire econ­omy. The re­al­ity is that you can be al­most cer­tain that it will also be used by politi­cians seek­ing to get elected.

24/7 Wall St. has tracked a slight vari­a­tion from news sources ahead of the re­port. These con­sen­sus es­ti­mates may change ahead of earn­ings, but there were last seen as fol­lows:

- Bloomberg sees 2.5% GDP and 1.5% on the price in­dex.

- Thom­son Reuters sees 2.5% GDP and sees 1.4% on the price in­dex.

- Dow Jones (WSJ) sees 2.5% GDP and 1.3% on the price in­dex.

It is easy to say that even a 2.5% num­ber would be far from ro­bust. What should stand out is that this would ac­tu­ally be the high­est rate in five quar­ters. Con­sumer spend­ing ac­counts for close to 70% of GDP on av­er­age, and that is ex­pected to be lower than what was seen in the sec­ond quar­ter. Non­res­i­den­tial in­vest­ment ac­tiv­ity is ex­pected to be a drag in the third quar­ter.

With weak GDP trends for the last year, there has been some sug­ges­tion that per­haps GDP should not be used as the only real mea­sure of the econ­omy. Af­ter all, un­em­ploy­ment re­mains quite low and the con­sumer seems to keep com­ing back af­ter each and every pause. One ar­gu­ment has been that the sea­son­al­ity of the first quar­ter and sub­se­quent re­vi­sions make it harder to use.

While the hope is for a 2.5% gain, the re­al­ity is that the last read­ing above 2% was the 2.3% growth seen in the sec­ond quar­ter of 2015.

Sadly, the post-Brexit trend will have started the third quar­ter off a tad weak in the U.S. and much of the eco­nomic data was com­ing out softer than ex­pected in Au­gust and Septem­ber. It should also be pointed out the ac­tual GDP has trended lower than the con­sen­sus es­ti­mate for each of the prior five quar­ters.

The good news is that a few eco­nomic read­ings from last week were tick­ing higher ahead of the com­ing re­port, and Q2-2015 GDP was re­vised higher. Still, the Fed­eral Re­serve in Septem­ber just pre­dicted low rates and low GDP could last for years.

GDP is ef­fec­tively the to­tal pro­duc­tion value of any quar­ter. It is made up of the pur­chases of do­mes­ti­cally pro­duced goods and ser­vices, and that ap­plies to pur­chases made by in­di­vid­u­als, busi­nesses, gov­ern­ment, and even for­eign buy­ers.

Fol­low­ing a slew of re­ports last week, AT&T has made it of­fi­cial: The U.S. tele­com gi­ant has agreed to ac­quire Time Warner in a deal worth $85 bln. Still sub­ject to reg­u­la­tory ap­proval, the deal would put AT&T in con­trol of world-fa­mous me­dia brands such as CNN, TNT and HBO along­side Warner Bros. En­ter­tain­ment, the world’s largest film and tele­vi­sion stu­dio in charge of fran­chises such as Harry Pot­ter, Game of Thrones and the DC Comics uni­verse. In­ter­est­ingly, the Time Warner deal would mark the sec­ond multi-bil­lion dol­lar ac­qui­si­tion in as many years for AT&T. In July 2015, the com­pany com­pleted the $49 bln ac­qui­si­tion of DIRECTV, mak­ing it the largest pay TV provider in the United States and the world. Adding Time Warnerowned HBO and Warner Bros. to the mix would give AT&T con­trol over the en­tire value chain, from con­tent pro­duc­tion to its mar­ket­ing and dis­tri­bu­tion to peo­ple’s homes and mo­bile de­vices. While that could open up in­ter­est­ing pos­si­bil­i­ties such as dis­tribut­ing pre­mium con­tent ex­clu­sively to AT&T sub­scribers or ex­empt­ing Time Warner’s pay TV ser­vices from data caps, it is all but cer­tain that such anti-com­pe­ti­tion prac­tices would be for­bid­den by reg­u­la­tors should they green­light the deal at all. (Source: Statista)

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