Deutsche Bank Chief U.S. Economist Joe LaVorgna is out with a preview of tomorrow’s advance Q2 GDP report, which he predicts will come in at 1 per cent.
A snapback from the first quarter’s weak defence spending could push the figure up, or weak inventories could skew it downward.
For LaVorgna, the important number from the report is actually not GDP. From his note:
The key metric for us will be final sales to private domestic purchasers, which is a narrower measure of final sales (the latter simply subtracts inventories from GDP). The former excludes inventories as well as government and net exports from its calculation to arrive at a more representative measure of private underlying domestic demand. In Q1, this series grew a decent +3.0% which translated into a slightly slower +2.7% year-over-year rate. For Q2, we expect this series to grow +2.3%, much faster than what final sales are projected to grow (+1.3%)
LaVorgna also weighs in on QE3, predicting that a disappointing GDP number could lead to an extension rate guidance from late 2014 to 2015. However, “meaningful easing” likely won’t come until the September meeting.¬†