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Tags: Zandi | US | Growth | Forecast

Moody's Zandi Raises First-Quarter US Growth Forecast on Trade Data

Friday, 13 April 2012 01:31 PM EDT

Mark Zandi, chief economist at Moody’s Analytics Inc., raised his forecast for U.S. economic growth in the first quarter after a report Thursday showed the trade deficit in February narrowed more than forecast.

Zandi now sees growth of at least 2.5 percent and “probably a bit north of that,” he said in a radio interview on “Bloomberg Surveillance” with Tom Keene. In early April, Zandi forecast 2.2 percent growth. “It is not boom times, but that is not bad,” he said.

The trade deficit narrowed as imports fell by the most in three years, reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods, Thursday’s Commerce Department figures showed. The gap shrank 12 percent to $46 billion, the smallest since October, from $52.5 billion in January.

Zandi said the figure for February “adds significantly” to first-quarter gross domestic product. The deficit subtracted 0.26 percentage point from GDP in the final three months of 2011, after adding 0.43 points in the prior quarter.

With growth on a sustainable path, U.S. policy makers need to shift their focus to long-term issues, such as reducing the budget deficit, he said. Zandi, who is based in West Chester, Pennsylvania, said business spending is maintaining its expansion and consumers have stayed resilient in the face of higher gasoline prices.

“Business investment in equipment and software is still coming in at a pretty solid clip,” he said. “Businesses are very profitable. Balance sheets are very strong. I think there is a lot of incentive for them to continue to look for growth opportunities.”

Auto Sales

Auto sales are leading consumer spending even as gasoline prices rise, Zandi said.

“Consumers have been doing their part,” he said. “Consumers are going to continue to stick in there, given the improving job market, given the continued gains in the stock market.”

Consumer confidence cooled in April from a one-year high as Americans’ assessment of their financial situation eased, a report Friday showed. The Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment dropped to 75.7 from 76.2 last month. The measure was projected to hold at 76.2, according to a median forecast in a Bloomberg News survey of economists.

© Copyright 2023 Bloomberg News. All rights reserved.

Friday, 13 April 2012 01:31 PM
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