Thursday's economic data told a positive story--with gross domestic product revised higher, jobless claims below consensus, and positive manufacturing numbers out of Chicago--but analysts say the economy has a long way to go before it will truly be in full recovery.
"Today's data surprised on the upside and added further weight to our forecast for moderately increasing economic momentum visible in the upcoming fourth quarter," said Robert Dye, senior economist for PNC Financial Services, Pittsburgh. "The data suggest that the soft patch of the second and third quarters is ending, but the recovery remains at half speed."
Real gross domestic product increased at an annual rate of 1.7% in the second quarter of 2010, just above the prior estimate of 1.6, according to the third estimate released Thursday by the U.S. Commerce Department's Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7%.
Steve Blitz, senior economist with New York-based Majestic Research, said the second-quarter GDP data suggests a lackluster economy that is unlikely to show much more promise in the third quarter.
"The 2% economy is like a .500 baseball team. You get a string of good data, you get a string of bad data, and at the end of the day, you're in the same place," Blitz said. "When you add up all the pluses and minuses, third-quarter real GDP growth will probably be the same as second-quarter growth, around 2%. Coming out of a recession, we would probably prefer right now to see growth more on the order of 4% or 5%."
In the week ending September 25, seasonally adjusted initial jobless claims came in at 453,000, a decrease of 16,000 from the previous week's figure of 469,000, revised up by 4,000, the U.S. Labor Department reported Thursday. The four-week moving average was 458,000, a decrease of 6,250 from the previous week's revised average of 464,250.
Economists' consensus was for jobless claims of 460,000, and the actual level of 453,000 "now looks convincingly below the 500,000 late summer peak," Dye said. The four-week moving average also trended significantly better than economists had expected.
Also on Thursday, the Institute for Supply Management (ISM) reported that Chicago's purchasing managers index (PMI) saw an improvement in business in September, thus chalking up 12 months of overall expansion.
The Chicago PMI's seasonally adjusted business barometer came in at 60.4 versus 56.7 in August, exceeding economists' expectations for a September index reading of 56.0. Production rose to a level of 64.3 in September versus 57.6, and new orders also were higher at 61.4 versus 55.0. The weak spot was employment, which has seen two months of decline, to 53.4 in September from 55.5 in August and 56.6 in July.
The Chicago PMI is considered to be a preview of the nationwide ISM purchasing index scheduled for release on Friday.
"This report will ease concern that Friday's ISM manufacturing index along with Tuesday's non-manufacturing index may show a breakdown toward the neutral 50 level," according to a Nasdaq news report.
Read about a sharply lower second-quarter GDP revision in August on AdvisorOne.com.