Final 3Q GDP Soars 4.9%, Initial Jobless Claims Rise, Leading Indicators Fall, Philly Fed Weak

- Final 3Q GDP rose 4.9% versus estimates of a 4.9% gain and prior estimates of a 4.9% increase.

- Final 3Q Personal Consumption rose 2.8% versus estimates of a 2.8% gain and a prior estimate of a 2.7% increase.

- Final 3Q GDP Price Index rose 1.0% versus estimates of a .9% gain and a prior estimate of a .9% gain.

- Final 3Q Core PCE rose 2.0% versus estimates of a 1.8% increase and prior estimates of a 1.8% gain.

- Initial Jobless Claims for this week rose to 346K versus estimates of 335K and 334K the prior week.

- Continuing Claims rose to 2646K versus estimates of 2610K and 2634K prior.

- Leading Indicators for November fell .4% versus estimates of a .3% decline and a .5% decline in October.

- Philly Fed for December fell to -5.7 versus estimates of 6.0 and a reading of 8.2 in November.

BOTTOM LINE: The US economy accelerated from July through September to the fastest pace in four years, Bloomberg reported. Growth last quarter was boosted by record exports and some inventory rebuilding. The shrinking trade deficit contributed 1.4 percentage points to GDP growth, the most in 11 years. Personal incomes grew at a 6% annual rate in the third quarter, which was well above the 4.3% year-over-year November CPI reading. I continue to believe booming exports, inventory rebuilding, decelerating inflation and resilient consumer spending will more than offset the drag from housing over the intermediate-term. 4Q GDP growth will likely come in around 1%, however I still expect GDP growth to average 2-2.5% over the intermediate term.

The number of Americans filing first-time claims for unemployment benefits rose more than forecast last week, Bloomberg reported. The four-week moving average climbed to 343,000. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 2%. While jobless claims have ticked up recently, they are still below the 20-year average of 351,400. I continue to believe the overall job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Leading indicators fell slightly more than economists expected, Bloomberg reported. The leading index is down at an annual rate of 2.3% over the last six months, well short of the 4.5% decline usually seen before recessions. Gains in the factory workweek, rising orders for capital equipment and slower delivery times helped cushion the decline in the leading index. I expect the leading index to begin rising in the first quarter of next year, boosted by gains in stocks.

Manufacturing in the Philly region fell in December, Bloomberg reported. The New Orders component of the index actually rose to 10.7 versus 3.5 the prior month. Moreover, shipments surged to 18.4 from 4.7 the prior month. The Inventory component fell to -6.7 from 2.5 the prior month. The Employment component declined to .5 from 4.8 the prior month. While the headline number was weak, the underlying components don’t indicate contraction. I continue to believe that manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories as a result of booming exports.