Reply #17: U.S. Data Fluke Exaggerated Growth, Will Be Reversed (Update3)

[54anickel]

http://www.bloomberg.com/apps/news?pid=20601087&sid=alZ83kYOa2IA&refer=home

Oct. 27 (Bloomberg) -- An unexpected increase in auto production last quarter was a statistical fluke that will be reversed, making current U.S. economic growth even weaker, according to a former Commerce Department economist.

Last quarter's annualized 26 percent increase in motor vehicle production shocked Joe Carson, now director of economic research at AllianceBernstein LP in New York. Without the gain, the economy would have grown at an annual rate of 0.9 percent, not the 1.6 percent the Commerce Department reported today.

The reported increase in output came despite cutbacks announced by General Motors Corp., Ford Motor Co. and others. A drop in the wholesale price of SUVs and light trucks as the automakers cleared leftover 2006 models made production look stronger than it actually was, said Carson. The economic fallout from the auto-industry cutbacks will instead come this quarter, he said.

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Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, called the numbers ``the most unbelievable detail'' in the GDP report. Stanley didn't lower his estimate for fourth-quarter growth because, while auto production will probably drop next quarter, other areas such as investment in aircraft and defense spending will probably rebound, he said.

The surprise for Stanley wasn't in the price component. It was that even before adjusting for inflation, the figures showed an increase that doesn't jibe with the numbers from the manufacturers, he said.

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