Money and Metals

Bloomberg reports on the error that may rock markets on Monday. "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 auto 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."

"The 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."

"'Last quarter was weak even with the benefit of this mismatch and the fourth quarter will now also be weak because it's going the other way,' Carson said. 'Whatever output you have this quarter, which will probably be down, will be discounted by a likely rebound in prices.'"

"An increase in inventories overall suggests manufacturers may need to trim production this quarter. The economy will probably grow at an annual pace of 1 percent from October through December, down almost a full percentage point from his earlier estimate, according to Joseph LaVorgna, chief U.S. fixed income economist at Deutsche Bank Securities Inc. in New York."

"'A relatively large inventory build last quarter will need to be worked off and that will produce a negative hit to production, employment and income,' LaVorgna added."