Economic data

GDP in Q3 grew 3.5%, faster than the consensus of 3.2% but Nominal GDP was below forecasts as it grew 4.3% vs an expected gain of 4.6%. It was thus an .8% gain in the deflator vs expectations of a 1.4% rise that helped in part lift the REAL GDP figure above estimates. Personal Consumption did bounce back by 3.4%, .3% more than expected and helped out by the CASH program as spending on durable goods rose by 22.3%. Helped out by the home buying tax credit, residential construction added .5% to GDP, the 1st time its contributed to GDP since Q4 ’05. Spending on equipment and software rose 1.1%, the 1st increase since Q4 ’07. Trade was a drag as imports grew faster than exports. Inventories fell $130.8b, less than the Q2 decline and thus added .94% to GDP. Real final sales, which take out the inventory influence, rose by 2.5%. Federal Govt spending rose 7.9% offsetting a drop in state and local spending.

Initial Jobless Claims totaled 530k, 5k above expectations but were little changed with last week. Continuing Claims fell again and to the lowest level since March but much of that decline has more to do with people exhausting the initial 26 weeks of benefits rather than finding a new job. There was however a drop on the week in the amount of people receiving Emergency Unemployment Compensation and Extended Benefits (off a big upward revision to the prior week) but there is also a high probability that it’s due to the exhaustion of benefits. The monthly payroll data will determine by how much as we hope that those running out of benefits find new jobs. The uncertainty in this is why Congress is debating another extension of unemployment benefits.

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