Thursday, November 29, 2007

3Q GDP Growth Surges 4.9%, Price Index Rises at Slowest Pace Since 1998, Jobless Claims Rise, New Home Sales Bounce as Inventories Fall

- Preliminary 3Q GDP rose 4.9% versus estimates of a 4.9% gain and prior estimates of a 3.9% increase.

- Preliminary 3Q Personal Consumption rose 2.7% versus estimates of a 2.9% gain and prior estimates of a 3.0% increase.

- Preliminary 3Q GDP Price Index rose .9% versus estimates of a .8% gain and prior estimates of a .8% increase.

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

- Initial Jobless Claims for this week rose to 352K versus estimates of 330K and 329K the prior week.

- Continuing Claims rose to 2665K versus estimates of 2575K and 2553K prior.

- New Home Sales for October rose to 728K versus estimates of 750K and a downwardly revised 716K the prior month.

BOTTOM LINE: Economic growth in the US surged in the third quarter to the most in 4 years, Bloomberg reported. A shrinking trade deficit, inventory rebuilding and more business investment than previously forecast were the primary contributors to the upward revision to third quarter growth. US I continue to believe inventory rebuilding, booming exports and decelerating inflation will more than offset the drag from housing over the intermediate-term, which will produce US economic growth has averaged a healthy 3.1% so far this year, despite the substantial drag from housing that began over 2 years ago. growth on average of around 2-2.5%.

The number of Americans filing first-time claims for unemployment benefits rose more than expected, Bloomberg reported. The four-week moving average of claims rose to 335,250 from 329,500 the prior week. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, rose to 2% from 1.9% the prior week, but remains historically low. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

New Home Sales rebounded in October after September sales fell more than previously thought, Bloomberg reported. The median price of a new home was $217,800. The number of new homes for sale at the current sales pace fell to 8.8 months’ worth from 9 months in September. New Home Sale rose 14% in the Midwest, 6.8% in the South and 1.8% in the Northeast. Sales fell 16% in the West. I expect New Home Sales to move higher next month as a result of the recent drop in mortgage rates and pent-up demand.

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