GDP MAY SPOIL PARTY FOR GOP
BY JOHN CRUDELE
August 26, 2004 -- ANYONE got a bunny? Because unless the administration can pull a rabbit out of its hat, the White House isn't going to like tomorrow's release from the Commerce Department.
As the last big economic report before the Republican National Convention, Friday's restatement of the second quarter's economic growth could be bad — or it could be even worse.
This is the second of three estimates of how fast the economy grew during April, May and June.
The experts are predicting that Washington will adjust the GDP down to just 2.7 percent annual growth for the second quarter. It had originally been reported at 3 percent, which had already disappointed Wall Street.
But some people are worried that a big jump in the U.S. trade deficit in June to $55.8 billion — from an already-staggering $46.9 billion in May — could mean that the GDP will be pushed down even more than expected.
It might even be below 2 percent.
The short explanation is this: every item purchased from overseas takes away from gross domestic product growth.
I should give some perspective.
Wherever second quarter growth comes in, it will be down from the 3.9 percent GDP growth in the first quarter, which in turn was down from 4.1 percent in the 2003 fourth quarter, which was well below the fluky 8.2 percent growth recorded in last year's third quarter.
The third quarter of 2003 was when tax cuts put spending money in people's pockets and stimulated economic growth more than — it turns out — could be sustained.
What does this all mean?
It means that the economy isn't likely to go away as a campaign issue.
The final GDP number for the second quarter will be released Sept. 29. The initial reading of the third quarter GDP will come out Oct. 29, just days before the election.
*
While the end of August is usually quiet anyway, the the coming of the convention is causing investment bankers — always smart but never too brave — to make adjustments to their already light summer schedule.
Fortunately, Wall Street doesn't have a whole lot of investment banking work to complete right now anyway.
The two-year old Sarbannes/Oxley law, which requires a greater amount of corporate disclosure, is still braking the deal wheel.
And last week's chaotic initial public offering of Google stock is making private companies think twice about asking the public for money.
Any company that needs to raise cash right now is more likely to sell off a business instead of going to the public markets.
This last phenomenon, alas, is causing enough deals to keep people with a lot of money busy.
* Please send e-mail to:
jcrudele@nypost
