Auction.com: Revised GDP Improves
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IRVINE, CA-The Bureau of Economic Analysis revised its initial estimate of the third-quarter GDP and reports that the US economy grew at a much stronger rate than previously stated, according to Chris Muoio, senior associate and economist with Auction.com. Muoio says the revised numbers bring third-quarter GDP to a real annualized 3.6%, which was well above the expected reading of 3.1% and the initial estimate of 2.8%.
“The largest contributor to growth was a rise in inventories, which represented 1.7% of the total growth,” Muoio says. “Some are concerned that the continued rise in inventories could result in firms being stuck with goods as consumer confidence fails, leading to weaker GDP growth in coming quarters. However, retail sales have continued to grow despite the fall-off in confidence measures, allaying fears for now.”
Consumption contributed 1% to the growth total, essentially the same as the original estimate and a solid positive future, showing that the consumer remains an engine of growth, Muoio continues. “The government sector was once again a minimally positive contributor to growth; this was a surprise in the preliminary reading.”
Auction.com has noted in its employment sectors report that state and local government payrolls have stabilized, “though the federal government continues to hemorrhage jobs,” says Muoio. “If the government, at the very least, ceases to be a drag on growth, it is possible the economy can take off, which dovetails with our view that decreasing uncertainty could be unleashing private-sector spending and investment.”
Additionally, the acceleration in growth dovetails with the pick-up in ADP employment seen last Wednesday; however, at deadline, Auction.com was awaiting the end of the week’s BLS figures for confirmation that the labor market tenor is shifting.
The pick-up in GDP growth to such a robust figure lends further credence to those suggesting the Fed will taper sooner rather than later, Muoio adds. “However, we believe any change in policy will occur in early- to mid-2014, as this data still fails to capture the government shutdown. The Fed has stated that some data has been clouded by that event and it wants certainty before beginning to tamp down the spigots. Additionally, we believe the Fed likely wants to get through the next round of government negotiations over the debt ceiling and budget in early 2014 before creating an additional variable for the economy to deal with.”
As GlobeSt.com reported last week, learning not to focus on the little blips, but instead to study general trends in home pricing is the key to understanding where the market is going, Peter Muoio, chief economist with Auction.com, told GlobeSt.com. Muoio cautioned not to get caught up in ups and downs over short periods of time, but to look at overarching trends over months or years to get a true sense of how the market is doing.
For an irreverent take on the macroeconomic environment, check out GlobeSt.com's Chief Economist authored by Dr. Sam Chandan.
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