Economic data

According to the S&P/CaseShiller HPI of 20 cities, prices fell 9.36% y/o/y in Sept, a touch more than estimates of a decline of 9.1%. On a m/o/m basis, prices rose .3% to the highest price level since Jan ’08 but has it still 29% below the July ’06 record high. 9 cities of the 20 saw m/o/m gains with Minneapolis and Detroit (yes Detroit but y/o/y fall still steep) leading the way but all 20 are still experiencing y/o/y declines led by Las Vegas and Phoenix. Overall, the improving home price data reflects the spring/summer home selling season which is the best of the year and also the influence of the home buying tax credit combined with low mortgage rates, cheaper prices and FHA guarantees for certain buyers with little down payment. With a likely rapid rise in future foreclosures still ahead and the prime area of the market feeling stress, home prices next year should resume lower after the tax credit expires and the Fed stops buying MBS.

Q3 Real GDP was revised to a gain of 2.8% from the initial reading of 3.5% and this is in line with estimates BUT Nominal GDP was revised to below forecasts at 3.3% vs forecasts of 3.6% and down from the 1st reading of 4.3% as the deflator was revised to a .5% gain vs expectations of .8%. Personal Spending was revised down to +2.9%, down from 3.4% and below forecasts of 3.2%. The inventory drag was a bit more than the 1st report and Real Final Sales, which takes out the inventory impact, was revised to a gain of 1.9% vs 2.5%. Trade was more of a drag as imports were revised higher than export growth. Government spending and spending on equipment and software were revised up but CRE and residential RE construction were revised lower. US corporate profits in Q3 rose 10.6%. Bottom line, while somewhat old news in that we’re 2/3 done with Q4, it sets the stage at which Q4 began and that was slightly below nominal estimates.

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