What Economists Are Saying Ahead of Friday's U.S. GDP Report

(Bloomberg) -- White House economic adviser Lawrence Kudlow is expecting a “very good” number for second-quarter U.S. growth, while one economist has warned that the pace of expansion is “close to a peak.” Either way, analysts are largely projecting that the main number in Friday’s report on gross domestic product will be a standout.

The median estimate of economists surveyed by Bloomberg is for an annualized growth rate of 4.2 percent, which would be the fastest since the third quarter of 2014. Projections range from 3 percent to 5 percent. Here’s what some of the forecasters say ahead of the Commerce Department figures due at 8:30 a.m., which will also include comprehensive revisions to historical GDP numbers:

Morgan Stanley (4.7%)

“The factors driving the headline print are trade related and will likely reverse in the second half of the year, at least in part,” analysts led by Ellen Zentner wrote. They estimate trade and inventories contributed about 2.2 percentage points to the pace of second-quarter growth, which is “likely a reflection of stockpiling ahead of the implementation of trade tariffs.” They estimate final private domestic demand, “a clearer fundamental picture of the economy,” expanded at a “much more modest” 2.5 percent pace in the quarter.

Wells Fargo (4.7%)

“Personal and corporate tax reform has proven beneficial to domestic demand, with solid growth in consumer spending and business investment growth in recent months,” economist Sam Bullard wrote. Net exports probably contributed 1.2 percentage point to growth, which “should fully reverse” in the second half. “While the robust Q2 pace should not be sustained, underlying economic fundamentals remain solid and support our outlook for U.S. real GDP to run around a 3 percent annualized rate for the remainder of the year.” Trade policy poses the main risk to the outlook.

Natixis (4.4%)

“We expect real GDP growth to increase at a hefty pace in Q2 after a trend-like increase” in the first quarter, economist Joseph LaVorgna wrote. “With the trade debate heating up, uncertainty is mounting on the near-term outlook. However, available regional surveys for July either remained steady or surprised on the consensus to the upside. This means that business confidence remains upbeat which is likely to translate into another quarter of solid GDP growth.”

Amherst Pierpont (4.7%)

“As it turns out, consumer spending did improve dramatically, but the main driver of growth in the second quarter was likely a massive narrowing in the trade gap, due primarily to a sharp increase in real exports,” economist Stephen Stanley wrote. “Domestic final demand was strong (projected to rise 3.1 percent) but unspectacular, and perhaps more importantly, largely sustainable.”

Bloomberg Economics (3.8%)

“Second-quarter growth will be robust, to be sure, and could potentially top 4 percent,” economists Carl Riccadonna and Tim Mahedy wrote. “However, this reflects a number of one-time idiosyncratic factors and should not be viewed as an indication of what is to come in the second half. Growth in the second quarter will be elevated in response to residual seasonality that depressed first-quarter activity. It will also be lifted by a substantial narrowing of the trade deficit in the quarter, which appears to be more a reflection of supply-chain adjustments in anticipation of trade-war escalation than any lasting improvement as a result of tariffs.”

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