WASHINGTON: US economic growth for the fourth quarter is likely to be revised higher after data on Wednesday showed a stronger pace of consumer spending on services than previously estimated, according to JPMorgan.
It said the Commerce Department's quarterly services survey, or QSS, showed consumption on services increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month.
JPMorgan economist Daniel Silver said the QSS data suggested fourth-quarter consumer spending could be raised by at least six-tenths of a percentage point to a 2.6 percent annualized rate when the government publishes its third GDP estimate on March 25.
While economists at forecasting firm Macroeconomic Advisers also expected an upward revision to consumer spending as a result of the QSS data, their estimate was not as robust and they saw the lift offset by an anticipated downward revision to growth in intellectual property products.
Investment in intellectual property products is expected to be cut to well below a 1 percent rate from a previously reported 1.3 percent pace.
JPMorgan expects fourth-quarter GDP growth will be boosted by four-tenths of a percentage point to a 1.4 percent rate.
"An upward revision to services spending in the fourth quarter has favorable implications for our first-quarter growth forecast because many of the services components are estimated based on a trend," said Silver.
"However, we do not think these forward-looking implications are significant enough to change our first-quarter GDP forecast, which we are keeping at a 2.0 percent rate."
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