U.S. and Canadian Data

November 23, 2010

Revised U.S. third-quarter national income accounts were released today.  GDP growth was revised to 2.5% from 2.0% annualized.  Consumption, investment, government spending and exports were revised upward.  Imports and the boost from inventory building were revised downward.  The personal consumption price deflator increased 1.0% annualized.  It’s now been three years since the onset of the subprime mortgage market rupture which precipitated a worldwide financial crisis and recession.  Over the three years between 3Q07 and 3Q10, U.S. real GDP and personal consumption ticked up 0.1% and 0.4% on balance.  Residential investment plunged 43.4%, and other investment spending dropped 11.7%.  Government spending rose 2.9% or 1.0% per annum, which is hardly the runaway pace that is widely portrayed in the popular press.  As in the 1930s, the soaring fiscal deficit reflects a drop in revenue caused by a deep economic downturn.  It hasn’t been driven by policy action.  Exports rose 6.3% in the three years to 3Q10, while imports fell cumulatively by 2.7%. 

Other U.S. economic figures released today showed

  • A slight decline in chain store sales last week, the final full week before the start of the holiday shopping season. 
  • Slightly softer-than-expected existing home sales in October.  Such fell 2.2% on month and 25.9% on year.  Prices dipped 0.6%.
  • A further improvement of the Richmond Fed manufacturing index to +9 in November from +5 in October and minus 2 in September.

Canadian retail sales expanded 0.6% in September, merely a shade under expectations, following a gain of 0.5% in August.  Two-thirds of September’s advance was in volume.  Sales have been recovering since very early 2009.  Canadian consumer prices vaulted 0.7% seasonally adjusted last month.  That was the greatest monthly increase since January 2006 and lifted on-year inflation by a half percentage point to 2.4%.  The CPI’s 2.8% annualized increase over the last three reported months was four times faster than the pace in the previous three months.  Bank of Canada officials are anticipating inflation of 2.1% on year in the current quarter.  That assumption now looks too optimistic.  Core inflation in October of 1.8% also surpassed the central bank’s 4Q expectation and 3Q result of 1.6%.  Gasoline prices have accelerated from a 12-month increase of 1.9% in August to 8.8% two months later.

The Fed at 19:00 GMT today will be releasing FOMC minutes from the meeting on November 3rd that announced plans to buy $600 billion of longer-term Treasury securities by next June.  Unsurprisingly, Tom Hoenig had dissented from that vote.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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