{"id":412,"date":"2014-12-16T10:26:00","date_gmt":"2014-12-16T15:26:00","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=412"},"modified":"2015-01-16T18:04:56","modified_gmt":"2015-01-16T23:04:56","slug":"revised-third-quarter-gdp-november-spending-income-durable-goods-orders-and-new-home-sales","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=412","title":{"rendered":"Revised Third Quarter GDP, November Spending, Income, Durable Goods Orders and New Home Sales"},"content":{"rendered":"

KEY DATA:<\/span><\/strong> GDP: 5.0% (revised up from 3.9%)\/Consumption: +0.6%; Disposable Income; +0.3%\/Durable Orders: -0.7%; Private Investment: 0.0%\/New Home Sales: -1.6%<\/p>\n

IN A NUTSHELL:<\/span><\/strong> \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The economy boomed in the summer and while growth may have moderated during the fall, it is still moving forward solidly.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/span><\/strong> \u00c2\u00a0<\/em><\/strong>Lots of numbers today.\u00c2\u00a0 Third quarter GDP growth was revised upward to its strongest rate in eleven years.<\/em><\/strong>\u00c2\u00a0 The revision was powered by a realization that consumers spent a lot more than initially thought. <\/em><\/strong>\u00c2\u00a0\u00c2\u00a0There was also better business investment activity.\u00c2\u00a0 It is nice that both households and businesses spent aggressively during the summer, but will that be sustained?\u00c2\u00a0 Maybe not at 5%, but we could easily get another number at or above 3.5%.\u00c2\u00a0 Consumer spending surged in November after a solid gain in October.\u00c2\u00a0 So much for a weak Black Friday.\u00c2\u00a0 <\/em><\/strong>The gains were across the board, when you adjust for price changes.\u00c2\u00a0 So far this quarter, real consumption is rising at a 3.7% annualized pace and that could come in even higher.\u00c2\u00a0 First, people have the money to spend.\u00c2\u00a0 Income, adjusted for inflation and taxes, surged in November and wage and salary gains were solid.\u00c2\u00a0 <\/em><\/strong>People are spending but the savings rate is fairly stable<\/em><\/strong>, a sign that households are not getting ahead of themselves.\u00c2\u00a0 <\/em><\/strong>Second, confidence is rising.<\/em><\/strong>\u00c2\u00a0 The Thompson Reuters\/University of Michigan Consumer Sentiment Index rose sharply in December to its highest level in nearly eight years.<\/em><\/strong>\u00c2\u00a0 Happy people make for happy shoppers.<\/em><\/strong><\/p>\n

The manufacturing sector has helped lead the way but there are questions about how strong it will be going forward.\u00c2\u00a0 Durable goods orders fell sharply in November<\/em><\/strong> and that was with a pick up in civilian aircraft demand.\u00c2\u00a0 The report was mixed.<\/em><\/strong>\u00c2\u00a0 There was weakness in primary and fabricated metals, computers and defense aircraft.\u00c2\u00a0 On the other hand, orders for computers, communications equipment and vehicles were up.\u00c2\u00a0 Business capital investment was flat.<\/p>\n

Housing has been moderating for a while and that trend seems to be continuing.\u00c2\u00a0 New home sales fell, surprisingly, in November.<\/em><\/strong>\u00c2\u00a0 Prices are rising, but not by much.\u00c2\u00a0 Indeed, the 1.4% increase over the year is much less than we are seeing in the existing market.\u00c2\u00a0 The Federal Housing Finance Agency\u00e2\u20ac\u2122s October increase came in at 5% since October 2013.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/span><\/strong> Patience is a virtue but it could also be an albatross around Janet Yellen\u00e2\u20ac\u2122s neck.<\/em><\/strong>\u00c2\u00a0 (I never worry about mixed metaphors.)\u00c2\u00a0 The key to Fed policy is economic and wage growth and boy is it clear the economy has shifted gears.<\/em><\/strong>\u00c2\u00a0 The consensus for fourth quarter growth has been about 2.5%. \u00c2\u00a0With the large upward revisions to third quarter growth, I am now closer to 3.5%, down from 4%, and the spending numbers support that estimate. While housing may not add much, the real uncertainty is consumers emptying shelves and causing inventories to drop.\u00c2\u00a0 That would moderate fourth quarter growth but when warehouses are restocked in the first quarter, activity would accelerate.\u00c2\u00a0 Regardless, the economy is in very good shape, probably better than the FOMC realized when it met and when Janet Yellen said she would be patient. <\/em><\/strong>\u00c2\u00a0The Fed may want to be patient and err on the side of too much inflation, but the strong job gains are likely to continue and lead to solid wages increases fairly soon.\u00c2\u00a0 The FOMC may have to move earlier than most now expect.\u00c2\u00a0 Investors should love today\u00e2\u20ac\u2122s numbers but once they stop drinking the spiked eggnog, they may realize that strong growth pushes forward the time when the Fed removes the syringe from the markets.\u00c2\u00a0 But for now, it is time to celebrate.<\/p>\n

Have a Happy<\/span> and Healthy<\/span> Holiday!<\/span><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: GDP: 5.0% (revised up from 3.9%)\/Consumption: +0.6%; Disposable Income; +0.3%\/Durable Orders: -0.7%; Private Investment: 0.0%\/New Home Sales: -1.6% IN A NUTSHELL: \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The economy boomed in the summer and while growth may have moderated during the fall, it is still moving forward solidly.\u00e2\u20ac\u009d WHAT IT MEANS: \u00c2\u00a0Lots of numbers today.\u00c2\u00a0 Third quarter GDP growth … Continue reading Revised Third Quarter GDP, November Spending, Income, Durable Goods Orders and New Home Sales<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28,3,7,41,27],"tags":[],"class_list":["post-412","post","type-post","status-publish","format-standard","hentry","category-durable-goods-orders","category-economic-indicators","category-gross-domestic-product","category-income-and-spending","category-new-home-sales"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=412"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/412\/revisions"}],"predecessor-version":[{"id":413,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/412\/revisions\/413"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}