NEW YORK (Reuters) - The U.S. economy contracted slightly less than initially estimated in the first quarter, while corporate profits rebounded, according to a Commerce Department report on Friday that hinted that the recession was moderating.
FRANK LESH, FUTURES ANALYST AND BROKER, FUTUREPATH TRADING LLC, CHICAGO:
“It’s supportive in that it’s not as bad. It’s better than down 6.1 percent originally. It’s another set of data that’s not as bad as expected. At this point, it just shows the state we’re in the first quarter and things are getting better, not that we’re off to the races here.
“In general, we’re buying into a recovery here and I’m not sure we have it.”
DAVID COARD, HEAD OF FIXED-INCOME SALES AND TRADING, THE WILLIAMS CAPITAL GROUP, NEW YORK:
“I don’t think anybody really cared about the GDP revision. It’s history. I am not quite sure why Treasuries are up (in price) here today. There continues to be some relief that the supply is behind us, for the moment.”
BORIS SCHLOSSBERG, DIRECTOR OF FX RESEARCH, GFT, NEW YORK:
“The GDP report is disappointing but not surprising. My premise is that the consumer is structurally dead. We are going through a major reduction in consumption. The whole recovery story has been built on corporate re-building where it loses all its momentum when it reaches the consumer. As a result the dollar is just being slapped around. I think the market is now getting realistic about this recovery. There will be a recovery, but it will be tepid.”
DAVID JOY, CHIEF MARKET STRATEGIST, RIVERSOURCE INVESTMENTS, MINNEAPOLIS:
“I wasn’t terribly surprised... it was within plus or minus what was expected. We had a big drawdown in inventories that maybe sets the stage for rebound in production once the economy gets some traction. The one strong revision was in corporate earnings -- with sales being down suggest earnings came from cost-cutting. That is not indicative of real traction in the economy. The Chicago PMI will be a big one.”
MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO., SAN FRANCISCO:
“Not too bad, the -5.7 was a little bit light, they were looking for -5.5. The numbers seem to be fairly consistent with the earlier forecast and especially with the projection that they were going to revise it slightly down. It looks like the weakness came in from the consumer spending side, down a little bit from what was originally reported. The change there is probably the one thing that I see more than any other influence.
“So, all in all, nobody was expecting any big surprises out of the first-quarter revision, so this is decent in terms of getting this number behind us. What I was worried about was that they would revise the inventory much better than they did and that would mean we didn’t see the drawdown that needs to be rebuilt. But we are beginning to see about 150 billion in drawdown over the last 3 quarters, that’s a tremendous amount of inventory that needs to be rebuilt. That’s what’s going to fuel growth in the third-quarter. It’s not going to be end sales in the third-quarter, it’s going to be inventory rebuild for fourth-quarter sales that’s going to be driving a better GDP number for the third-quarter.”
CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK
“The entire change can be explained by inventories which didn’t fall as much as previously thought. There was a bit of shift in the mix: a bit less consumer spending and a bit more investments.”
“This is a first-quarter number. We already had some early numbers from the second quarter. The recession is easing. The second quarter is shaping up to be a smaller decline about 3.0 to 3.5 percent. It should be the last of the negative quarters.”
MARKET REACTION: STOCKS: U.S. stock indexes were flat. BONDS: U.S. Treasury debt prices trimmed losses. DOLLAR: U.S. dollar was weaker.
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