GDP, Durable Goods
Consensus for Q3 GDP is 3.2%; the consensus range was from 2.5% to 4.0%.
I am on the low end of the range, but given how an under-reported inflation number enhances GDP, a higher data point would not surprise me.
NT's Asha Bangalore notes:
"Durable goods orders fell 1.7% in September, following a 5.3% drop in the prior month. The 38.7% drop in orders of durable defense items was the major cause for the drop in durable goods orders. Excluding defense, bookings of durable goods increased only 0.7%. Orders of non-defense capital goods rose 4.4% in September after a 12.2% decline.
The more troubling issue is the fact that both orders (-8.4%) and shipments (-1.1%) of durable goods are weak on a year-to-year basis."
A few of Asha's more interesting charts as we await GDP at 8:30 this morning:
Orders and shipments of non-defense capital goods excluding aircraft, the less volatile
component of durable goods, also send a similar message:
Source:
Wilting Durable Goods Orders - Precursor of More to Come?
Asha Bangalore
Northern Trust, Global Economic Research October 25, 2007
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0710/document/dd102507.pdf
Wednesday, October 31, 2007 | 07:00 AM | Permalink
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GDP number will be on the low end to leave the Fed free for cuts today or later.
Posted by: Neal | Oct 31, 2007 7:51:59 AM
The day is finally here that the Fed either confirms that it's Wall St's bitch (I stole that from you-know-who) catering to their every wish or it's an independent institution that defends the value of the US$ and thus price stability in addition to its growth focus. US Treasuries are trading down ahead of the news following a selloff in European bonds after euro region CPI rose 2.6%, .3% more than expected and the highest since bloomberg has data going back to Oct '01. ABC confidence rose 2 pts to -15 but remains 8 pts below the 1 yr avg. Mortgage apps were mixed as refi's rose 9.2% to the highest since March but purchases fell .7%. The BoJ left rates unch as expected and lowered its forecasts for both growth and inflation. ADP Oct private sector job growth expected to total 58k and would be the 8th month of 9 below 100k. Q3 GDP expected to rise 3.1%. Q3 ECI, Chicago PMI and Construction also out.
Posted by: Peter Boockvaar | Oct 31, 2007 7:52:39 AM
Marketwatch has a complementary article today that makes a point I agree with - this Q's number isn't as important as the next two because, my own spin, the trend is down, we're in a growth recession and the riks of BigR are rising and accelerating.
MW:
Ignore Wednesday GDP report: Economists say next two quarters crucial, January-March 2008 most dangerous for sharp slowdown.If you've listened recently to some prominent Wall Street economists, the U.S. economy in the next two quarters is going to slip from the jaws of the credit crunch, hurdle the tiger-trap of the housing slowdown, swing across boiling oil prices, and land on its feet having narrowly escaped a recession. But many economists are skeptical. They say that this scenario of the economy as swashbuckling hero from a classic B movie isn't very realistic. Instead, they are seriously concerned that the economy soon could slip into a recession.
Economy as Indiana Jones: http://tinyurl.com/ytbjuf
Posted by: dblwyo | Oct 31, 2007 8:00:26 AM
from John Hussman:
Here is what the data look like since 1960. The graph below plots the year-over-year change in the U.S. current account (billions of U.S. dollars) against the year-over-year change in U.S. gross domestic investment. The slope of the best fitting line is literally -1.0. Every $1 “improvement” in the U.S. current account is typically associated with $1 of deterioration in U.S. gross domestic investment. Indeed, if you look in the lower right quadrant, you'll notice that major year-over-year improvements in the current account are almost always associated with plunging gross domestic investment
[ Graph Showing -1 d(Investment)/d(current Account)]
So the idea that an “improving” current account deficit is good for GDP growth is a lot like believing that walking across the street to the donut shop is “good” for your weight. Sure if you think of the walk in isolation, you're burning calories. But walking to the donut shop is usually directly correlated with eating a donut.
The same idea applies here. If you look at the current account deficit in isolation, the GDP equation leads you to believe that a smaller current account deficit will improve GDP. Unfortunately, the improvements that we're seeing are not coming from increased saving or productivity, but rather, from weakening domestic investment (particularly in the housing sector), which is creating a smaller demand for imported savings from foreigners. As Bill Hester notes this week, there are also growing risks in the area of fixed investment
Posted by: blam | Oct 31, 2007 8:42:17 AM
Indiana Jones and the Mountain of Debt - I like it.
Meanwhile, sales at Harrison Ford are down -17% YOY.
Posted by: Winston Munn | Oct 31, 2007 8:42:51 AM
Housing topped in 2005, we are going into 2008 pretty soon. When is this housing recession gonna finally hit? The housing doom and gloomers keep predicting recession but it never comes.
I wonder.
Posted by: Logic | Oct 31, 2007 8:46:07 AM
Hamlet dies in the Fifth Act.
Posted by: rob | Oct 31, 2007 8:49:32 AM
GDP 3.9, deflator 0.8
Let's see, if deflator were 2.8, GDP would be 1.9
Not so subtle.
Posted by: Neal | Oct 31, 2007 8:51:56 AM
THE DEFLATOR IS BOGUS!!! THE CPI IS BOGUS!!! ALL THE NUMBERS ARE BOGUS!!!
It's the game we play, that's all. There is no secret. The secret is there is no secret. Look at YOY price changes in oil, ALL commodities, the dollar, gold, whatever. Prices are much higher than anyone in the government will ever admit.
It's just a stupid game. Inflate away, lie about growth, lie about what's really going on.
Tell ya what, they can only play the game so long until the big reckoning comes. Until the dollar totally craters. As if it hasn't already.
Now even Rubin is starting to worry aloud.
How much longer can the lies go on? FOREVER!!!!!!!!!!
Posted by: vega | Oct 31, 2007 9:15:10 AM
I watched V for Vendetta last night. I read this stuff and really believe that people are becoming brainwashed sheep!!!
"Despite rising worries about commodity prices, the GDP price index, the broadest measure of price changes in the economy, rose just 0.8% annualized, matching a nine-year low. Inflation hasn't been lower since John F. Kennedy's administration."
Posted by: Sammy20 | Oct 31, 2007 9:17:48 AM
(meant to post this under this entry, not the last)
If the Fed does cut today, after the GDP data, the market will eventually come to the understanding that "it", not the Fed, has been appointed to look after inflation. It will also intuitively understand that inflation is detrimental to its health in the long run. Over the next few weeks, the market will start to react to inflatiion, not necessarily the doctored data, much as it would react to a Fed statement. In other words, the Fed will have made itself irrelevant. Bernanke may become the new Arthur Burns with his unfortunate relationship to the Nixon White House.
Posted by: fenner | Oct 31, 2007 9:18:47 AM
GDP better than expected. Let's watch as the permabears try to explain away the good news.
Let me take a stab at it:
"The numbers are fake!"
"The neo-cons are trying to con us again!"
"Yes, but if you drill down on the numbers, the real GDP growth was -4.5%."
"Growth ex-growth means that gold goes higher, we're in a terrible recession!"
"The Dow is headed to 8600 this year."
Posted by: Nova Law | Oct 31, 2007 9:25:38 AM
Wow 3.9 % !!
Posted by: Bill | Oct 31, 2007 9:39:50 AM
Good number. Now people don't expect 50bp, and... we get a surprise rally again. If that does happen, then either Friday employment sucks or the Fed will have a hard time justifying the cut.
Nova Law: in the same way the bulls explain away the bad news (weak data, fed cut, stocks rally) you could make the opposite argument for the bears now, except higher rates at this particular point in time is a much better case for the bears, than lower rates on bad data is for the bulls.
Posted by: RichardN | Oct 31, 2007 9:54:14 AM
I love the smell of inflation in the morning.
Posted by: KP | Oct 31, 2007 9:56:29 AM
Okay, I have a question for the legions, if you accept the GDP numbers at face value, where is the logic for a rate cut? The economy is doing fine.
Posted by: ARISTOTLE | Oct 31, 2007 10:14:08 AM
Wallstreet's bitch need not be concerned with logic, only obedience.
Posted by: KP | Oct 31, 2007 10:21:08 AM
Can anyone explain how the use of "chained" 2000 dollars in the calculation of GDP might skew the readings???I've checked out the last page of the release but alas can't clearly make it out...
Any skilled readers able to help???
Posted by: SINGER | Oct 31, 2007 10:25:13 AM
Yes everything is fine in NOGO land..
Try interpreting what is presented to you instead of taking it for face value.
This is the same commerce department that reported a 4K loss in jobs (coincidentally just prior to the last fed meeting) and then swiftly revised them upwards to show a gain of 89K after the rate cut was given.
How you can have faith in anything they produce (it suits your position to do so this time) is just beyond comprehension.
But I expected that from NOGO land...
Ciao
MS
Ciao
MS
Posted by: michael schumacher | Oct 31, 2007 10:26:57 AM
Let me see...
Bad News => Markets go up
Good News => Markets go up
Okay, makes sense to me
Posted by: Pool Shark | Oct 31, 2007 10:37:22 AM
Nice to see Michael Schumacher still hanging around here, slinging juvenile insults. He was doing the same thing, claiming the same bear BS back when the Dow was below 10,000.
But then I love to make money (and have) while permabears and conspiracy theorists remain (as always) resolutely stuck on stupid.
Posted by: Nova Law | Oct 31, 2007 10:42:19 AM
No insult from me unless having to tell you to make up your own mind and not just spout a gov't report that says it's all fine is an insult.....than I guess I just insulted you.
You still miss the larger picture but I digress......
On a day that produces this headline:
"Economy Grows at Brisk 3.9 Percent Pace in Summer, Best Performance in 1 1/2 Years"
What effing planet do we live on that produces an environment where we are even considering a cut in rates???
To quote General Buck Turgison:
"Look at the big board!"
Ciao
MS
Posted by: michael schumacher | Oct 31, 2007 10:51:36 AM
Not much to comment on the GDP figures as they are deemed to be revised they are just preliminary.Revised they have been more often than none.
They will be revised in accordance with the definition of the economist
"The one who will tell you tomorrow that the forecasts he made yesterday fo today are wrong"
Posted by: Philippe | Oct 31, 2007 10:53:52 AM
Ha ha ha ha ha, told you so!!
(see you at the next bit of intermittent/falsely-prophetic scrap of good news)
Posted by: Cherry Picking PermaBull | Oct 31, 2007 10:56:42 AM
Trot out some figures on your own Nogo.....
If you actually looked at almost all economic indicators what you call an argument would'nt be standing up for two seconds.
Face it...Earnings suck...CAPEX is not going to rescue us and the numbers that you (and the permabulls) use are suspect at best since they are almost ALWAYS revised upwards to suit a position.
That is not skill it's just misrepresentation (something you seem to know alot about) so spare me the smug attitude that you are "on it" and making right calls left and right.
AS Barry has asked you (and other permabulls) before.....Prove it with your "results"...
Thought so..
Ciao
MS
Posted by: michael schumacher | Oct 31, 2007 10:58:14 AM
