The unexpected strength of third quarter GDP growth, which was revised up to 3.9% annualized rate from 3.5%, is further evidence the economy is on the verge of finally reaching escape momentum. Consensus had expected a nominal downward revision to 3.3%. The past six months the economy has grown at its fastest pace in a decade.
Personal consumptions and business investment were both revised considerably higher thus suggesting the decline in oil prices may be benefitting the consumer and corporations are finally spending some of their massive cash hordes.
The data bodes well for a “three handle” for fourth quarter growth.
Some will comment about the unexpected decline in November’s consumer confidence and its implication to holiday shopping, however the data does not square well with University of Michigan sentiment survey, the drop in gas prices and the steady decline in weekly jobless claims. A strong argument can be made yesterday’s confidence numbers is a one off event and will probably be revised higher.
It is widely accepted today’s growth does not feel like the strongest six month growth rate in 10- years. I will argue this is the result of lack of stated inflationary pressures. Real and nominal GDP are almost the same. Typically nominal GDP is 275-300 basis points higher than real GDP thus giving the false impression that growth is greater than it really is.
Real GDP data is reported after subtracting the impact of inflation.
There was little market response with most attention focused upon the impending East coast snow storm and Thanksgiving holiday.
Speaking of Thanksgiving, there is so much we can be thankful for. Yes there are injustices, but focus upon the positives not the negatives. We are still living in the best country in the world.
Last night the foreign markets were mixed. London was up 0.14%, Paris down 0.05% and Frankfurt up 0.55%. Japan was down 0.14% and Hang Seng up 1.12%.
The Dow should open quiet ahead of reports on spending, home sales and durable good orders but trading is expected to be muted given the upcoming holiday and poor east coast weather. The 10-year is unchanged at a 2.26% yield.
