GDP Revision Seen as Key Clue for Economy

A crucial revision of government data on U.S. economic growth in the first quarter, expected Friday, could influence the Federal Reserve and the markets.

Economists now expect gross domestic product to show growth of 1.5%in the first quarter of 2001, slower than the surprisingly strong 2% advance reading April 27.

A revision to 1.5% is not expected to affect the market much. However, should the figures come in much weaker, brace for a market sell-off, some experts warn.

“The reaction would be, ‘Oh God, things are really bad, we really are stepping into a recessionary rut,’ ” said Richard Babson, president of Babson-United Investment Advisors Inc., which manages $1.8 billion. “If the market doesn’t like the figures and they fall below 1%, I think the Dow will go below 11,000.”

Also due Friday is consumer confidence data for May from the University of Michigan.

Investors will tune in to speeches over the course of the week from Fed officials for any hints on the central bank’s next move, following last week’s rate cut. The most notable will be Chairman Alan Greenspan’s address on economic developments at an Economic Club of New York dinner Thursday.

In other economic reports expected this week:

* Thursday brings weekly jobless claims data, or the number of Americans filing for unemployment benefits. This report has moved more into the spotlight recently after the numbers surged over the 400,000 mark, a level that was getting some market watchers worried about worsening unemployment as companies bit by the economic slump lay off workers.

* Also Thursday will be new-home sales for April, with last month’s number forecast to be 975,000, down from 1,021,000 in the prior month. Data on existing homes for April is expected Friday, with the numbers seen at 5.25 million compared with 5.44 million for the prior figure.