Stocks Lower on Strong GDP Report!
U.S. equities are lower on strong economic data. It is now obvious that good news for the economy is bad news for the stock market as market participants are focused on tapering of bond buying program by the Feds. Good economic news means the tapering may take place as early as this month! The Q3 U.S. GDP growth boost to 3.6% from 2.8% beat estimates thanks to a huge $30.5B inventory boost that was twice the estimates, alongside a hike in equipment spending to a flat figure from a previous 3.7% drop.
Analysts saw the expected small hikes in nonresidential construction and government spending, an $8.9 B downward net export bump, and a modest trimming in consumption that left a revision in final sales growth to 1.9% from 2.0%. Our GDP growth forecasts of 1.5% for Q4 and 2.0% for Q1 face downside risk from the Q3 inventory overshoot, though distribution of downward bumps between the quarters will be sensitive to tomorrow’s personal income and jobs data.
The average real GDP growth clip for the overall expansion rose to 2.3% in Q3 from 2.2% since Q4 of last year, while average nominal GDP growth for the expansion rose to 3.9% from 3.8% in Q2 but the same 3.9% in Q1. U.S. factory orders dipped 0.9% in October, close to expectations, and September was revised slightly higher to a 1.8% clip from 1.7% previously. The 2.0% drop in durable orders was revised to -1.6%. Transportation orders declined 5.7% after a 13.1% September jump. Excluding transportation, orders were unchanged. Non defense capital goods orders excluding aircraft slipped 0.6% from an upwardly revised 1.2% September decline (was -1.3%).
