Wednesday, November 29, 2006

Good News for Goldilocks

The soft landing scenario for the U.S. economy became even more likely with today's economic data that shows the economy is still chugging along on almost all cylinders.

Growth was revised for the 3rd quarter to be quite a bit stronger. From the front page of the WSJ -

GDP Growth Revised Up to 2.2% For 3rd Period on Less Trade Drag

WASHINGTON -- The U.S. economy was stronger last summer than first thought because businesses accumulated more inventory and trade was less of a drag. Gauges measuring third-quarter inflation were lowered slightly, according to Wednesday's data revisions.
Gross domestic product increased at a 2.2% annual rate July through September, the Commerce Department said Wednesday in its first revision to third-quarter 2006 GDP. The government initially estimated growth at 1.6%......

Also, the Fed's favorite inflation indicator continued to move downward. This gives the Fed more room to maneuver funds rates down as the bond market has priced in by about 52%

...The government's price index for personal consumption increased 2.4%, lower than the previously estimated 2.5% climb but below the second quarter's 4.0% rise. The PCE price gauge excluding food and energy increased 2.2%, lower than the previously estimated 2.3% climb and below the second quarter's 2.7% rise.

What about American companies how are they doing? Well just fine thank you!

...Corporate profits after taxes climbed 4.6% to $1.167 trillion in July through September from the second quarter, the report showed. In the second quarter, profits increased 0.3%. Year-to-year, profits surged 31.5% since the third quarter of 2005.

And what are these profitable companies doing with their cash you ask?

...Businesses increased third-quarter spending more than previously thought. Outlays rose 10.0% July through September, higher than the originally estimated 8.6% advance. Business spending rose 4.4% in the second quarter. Third-quarter investment in structures surged 16.7%. Equipment and software increased 7.2%.

And lastly, don't forget about the American consumer......urh.................the energizer bunny..

Third-quarter spending by consumers increased 2.9%, down from a previously reported 3.1% but above the second quarter's 2.6% advance.


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