GDP Growth Revised Down

Even as the East Coast gets ready to face Irene, all eyes will be on Ben Bernanke as he delivers his highly anticipated speech at the Fed's annual Jackson Hole confab. But while Bernanke's speech is the most important item on the market's agenda today, we also saw a negative revision to the second quarter GDP report this morning.

The GDP growth rate was revised down to 1% from the originally reported 1.3%; the expectation was for the growth rate to come down to 1.1%. The headline miss notwithstanding, the internals of the report were positive and reassuring. The negative revision mostly reflected weaker inventory investments and exports, which are typically volatile and considered less desirable growth drivers within the GDP accounts.

On the positive side, consumer spending growth was revised upwards, from the originally reported 0.1% growth to 0.4%. This shows that there was relatively more momentum in consumer spending as we entered the second half of the year than was initially thought.

Not to make too much of the relatively favorable mix in revisions, it is difficult to say anything good about a 1% GDP growth pace. Most of the economic readings in July and August have continued to show the weakness that we saw in the original second quarter GDP report. These weak reports have heightened the fears of another recession in the coming months.

And as is typically the case in periods of anxiety, the market is looking to the Fed to come to its rescue. We will find later today what Bernanke has to say on that count. But I am convinced that he will give no indication of further quantitative easing in his speech today. Those looking for such signals will likely get disappointed.  

On the earnings front, we got better-than-expected results from Tiffany & Company (TIF - Analyst Report) this morning. The luxury jeweler raised its outlook for the year as it continued to experience strong demand across all markets, particularly in the Asia-Pacific region. We got inline earnings from Krispy Kreme Doughnuts (KKD - Snapshot Report) after the close on Thursday on better-than-expected revenue.

Pandora Media (P - Snapshot Report), the online radio company, came out with better-than-expected results in its first quarterly report as a public company. Shoe Carnival (SCVL - Snapshot Report), the footwear retailer, blamed bad weather for their weaker-than-expected quarterly results.

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