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Further Fodder for Fed-Fretting Expected

March 27, 2000|Bloomberg News

Evidence is mounting that the government could revise higher its estimate of U.S. economic growth during the closing months of 1999--to a 7% annual rate or more. Old news? Sure. And yet, it's the kind of old news that reinforces the Federal Reserve's concerns that the economy is growing too fast as the first quarter ends and the second begins. "The fourth quarter is rapidly receding in the rear-view mirror," said Peter Kretzmer, an economist at Banc of America Securities in New York. "The first quarter, with equally fast domestic demand, is now the focus." The average forecast is that fourth-quarter gross domestic product, the sum of all goods and services produced in the U.S., expanded at a 7% pace--faster than the government's previous estimate of 6.9% and the fastest since the final quarter of 1987, when growth was 7.2%. The Commerce Department is scheduled to release the statistics Thursday.

Other economic statistics due out this week--from home sales to claims for unemployment benefits to personal income and spending--point to an economy that has yet to slow in response to the Fed's five interest-rate increases since June.

* Consumer spending probably increased by 0.8% in February, following a 0.5% increase in January, analysts said. Personal income was also up, rising 0.3% on top of a 0.75% January gain, forecasts show. The Commerce Department will release that report Friday.

* Jobless claims, for release Thursday by the Labor Department, probably held well below 300,000, a level that's consistent with the lowest unemployment rate in three decades.

* The consumer confidence index, set for release Tuesday by the Conference Board, will probably hold just below a level not seen since the 1960s, further evidence consumer demand isn't cooling. The index probably fell to 139.7 in March from 141.8 during February, and down from January's all-time high of 144.7, analysts said.

* Home sales also point to growth. Sales of previously owned homes probably rose 3.1% in February to 4.73 million units at a seasonally adjusted annual rate. The National Assn. of Realtors will issue those figures, which account for 85% of all U.S. home sales, today. A Commerce Department report on February new-home sales, set for Wednesday, will probably show a decline, though the level of sales--871,000 at an annual rate--points to strength.

* Figures on heavy industry, set for release Friday, will probably be mixed. Analysts anticipate a 0.3% drop in February factory orders from the Commerce Department, mainly reflecting weakness in commercial aircraft orders. A regional report on manufacturing in the Midwest, from the Chicago purchasing managers, will probably show factories stepped up business last month.

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