A mountain of data out this morning. The data was more or less in line with expectations, but investors are once again more focused on the dollar and the potential liquidity implications. Stocks recovered sharp overseas losses in early morning trade before tanking again, recovering again and tanking as I write. The bi-polar market is still alive and well.
GDP was in-line, but does mark the official end to the recession as the economy moves into growth territory for the quarter. Revisions downward were broad this quarter and growth is not coming back as quickly as some would like despite record government intervention. Econoday has the details:
The recovery is not as strong as hoped, based on the latest Commerce Department revision to third quarter GDP. Economic growth was revised downward to an annualized 2.8 percent from the initial estimate of 3.5 percent. The market consensus had expected a 2.8 percent figure for the new estimate. Nonetheless, the third quarter boost is still the first positive number for GDP since a 1.5 percent gain in the second quarter of 2008. The third quarter increase, however, appears to have ended the recession which faded with a 0.7 percent dip in the second quarter.
The downward revisions were broad based, lowering estimates for PCEs, nonresidential structures, residential investment, business inventories, and net exports. Upward revisions were seen in business equipment & software and in government purchases.
On the housing front we got the monthly data out of Case Shiller. The readings showed a continued improvement in home prices, but the pace of appreciation is marginal at best. The 20 city index grew at 0.03% month over month. Although housing prices appear to be stabilizing due to record government programs and intervention it is far from recovering. Housing prices remain near their recession lows.
Retail sales were very strong this morning as year over year comps become increasingly easy to surpass. ICSC came in at +3.3% while Redbook came in at +2.8%. It’s difficult to glean too much from this data as the extraordinarily weak period last November skews all of the data. ICSC’s week over week reading was flat.
Consumer confidence remains in the dumpster despite a better than expected reading this morning. Expectations for holiday sales are weak at best and hope for the future of the job market remains depressed. Lynn Franco, Director of the Conference Board Consumer Research Center had these comments on this morning’s data;
“Consumer Confidence posted a slight gain in November. The Present Situation Index, however, was virtually unchanged and remains at levels not seen in 26 years (Index 17.5, Feb. 1983). The moderate improvement in the short-term outlook was the result of a decrease in the percent of consumers expecting business and labor market conditions to worsen, as opposed to an increase in the percent of consumers expecting conditions to improve. Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood.”
All in all, little of this is shocking to investors who are clearly more focused on the dollar and future liquidity in the system.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.