Hopes that the US economy is on the brink of recovery will get a triple booster this week with upward revisions to key estimates of growth and testimony from the chief central banker Alan Greenspan.
Analysts are growing confident that the second estimate of GDP in the last quarter of 2001 will show growth hit 0.9 per cent compared with the first guess of 0.2 per cent.
Even that meagre level of growth took Wall Street by surprise and a four-fold upward revision is likely to spark a surge in optimism about the state of the global economy. The new estimate, which is published on Thursday, could come in as high as 1.2 per cent, according to some analysts, based on strong consumer spending, an improved trade performance and a rebuilding of inventories.
Ian Shepherdson, the chief US economist at High Frequency Economics, which predicts 1.1 per cent, said the outcome will be a "stark contrast to the incredibly gloomy" forecasts after 11 September.
"The better the economy performed in the fourth quarter, the more receptive investors will be to the idea that growth could well turn out to be quite strong this year," he said.
Optimists will be handed further ammunition if the ISM survey on manufacturing – formerly known as the NAPM – shows the sector grew in February for the first time in 19 months.
If overall growth, and manufacturing output in particular, both turn out strong, that will trigger speculation the Federal Reserve will start raising interest rates sooner rather than later.
The financial markets are already expecting rates to rise by half a point from their current 1.75 per cent by September. The next meeting is on 19 March.
Analysts will comb over every word of the testimony that Mr Greenspan, the Fed chairman, gives to Congress on Wednesday.
Analysts expect him to be more upbeat than he was a month ago but to play down the expectations of a rate rise.
"His economic assessment should be relatively favourable with growth set to accelerate through the year, although he may qualify this with his thoughts on the Enron collapse and its implications," said James Knightley, an economist at ING Barings.
A positive message from Mr Greenspan and from the data would also give a much-needed fillip to the stock markets, which ended last week on the brink of another drop. The Nasdaq is testing support which lies in the region of 1,700 to 1,750 while in London the FTSE 100 slid past the 5,050 level on route to 5,000.
Mike Lenhoff, the chief strategist for the London brokerage Gerrard, said strong growth figures would encourage analysts to upgrade their corporate forecasts. "That would be unambiguously welcome news for the equity markets," he said.
Ironically the economic signals may be less optimistic for the UK, which so far has emerged the least scathed by the global economic downturn.
Some analysts believe revisions to fourth quarter GDP figures on Wednesday could show the economy came within an inch of grinding to a halt. Some believe growth could be revised to 0.1 from 0.2 per cent. However the consensus view is that it will remain unchanged.
Any downward revision would assist the Bank of England in its efforts to dissuade people from following the financial markets' view that UK rates will surge to 5.25 per cent, from 4.0 per cent currently, by the year end.Reuse content