Advance Estimate of 3Q2014 GDP Exceeds Expectations

image10 300x290 Advance Estimate of 3Q2014 GDP Exceeds Expectations

Contributions to 3Q2014 GDP By Major Component

The Advance Estimate of 3Q2014 GDP came in at 3.5% well above expectations. In comparison, the Final GDPNow Estimate came in at 2.7% and the WSJ Economists Consensus was 3.2%.

If you look at the contributions by major component in Doug Short’s Graph (Typo in 2nd Col, “Q1″ Heading should be 2014), the growth came from unlikely sources, Government Expenditures (0.8%) and Net Exports (1.3%). We knew the Imports were dropping while Exports unexpectedly grew faster than normal, reducing the Trade Deficit. However, most of us didn’t expect the Government to increase its spending during the Mid-Term elections. If Government Expenditures had stayed level as they did during the last several quarters, then 3Q2014 GDP would have come in at the 2.7% growth rate.

We expected slower growth in PCE (1.2%) and GPDI (0.2%) based on current economic indicator trends. So, where do we go from here? Unfortunately, we will have to wait 30-days for the 2nd Estimate and 60-days for the Final Estimate of 3Q2014 GDP before all is said and done for the period.

In the meantime, we plan to take a deeper dive into sub-categories of the major components early next week. The Mind Map of the Change in GDP from the 2nd to the 3rd Quarter should be ready over the weekend.

Have a safe, but fun Halloween night with the kids!

Final Estimate of GDPNow Comes In At 2.7% for 3Q2014

image9 300x247 Final Estimate of GDPNow Comes In At 2.7% for 3Q2014

The Atlanta Fed’s GDPNow Estimates 3Q2014 GDP at 2.7%

The Atlanta Fed’s GDPNow estimate for 3Q2014 GDP falls 0.3% to 2.7% from 3% estimated on October 17, 2014. Yesterday, the WSJ Economists Consensus came in at 3.2%. We expect the Advance Estimate for 3Q2014 to come somewhere in the middle of that range. We are still hopeful for a 3% growth rate when all is said and done.

Real Retail Sales & Durable Goods Orders both disappoint and contributed to the lowering of the estimate. We expect a rebound during the 4th Quarter due to the Holiday Season. Hopefully, it will be enough to maintain its 3% growth despite the expected slowdown in manufacturing and production.

Over the weekend, we plan to update the Mind Map with the Advance Estimate to bring it back to a quarterly comparison. Although we expect some minor adjustments in the 2nd and Final Estimate over the next 2 months, we should not have any major swings as we had during the last quarter.

Tweet Peeks at 3Q2014 GDP for W/E 10-24-2014

image15 Tweet Peeks at 3Q2014 GDP for W/E 10 24 2014

US Economy Exposed – Debt Crisis

@KeithEOuellette: After a slow week of key economic indicator releases, what there was in the news was more positive. Our Final Overall rating is now positive for 3Q2014. Last week, the GDPNow Forecast of 3Q2014 came in at 3.0% growth. We continue to believe we will attain 3% GDP growth for the balance of the year. The Advance Estimate of 3Q2014 GDP is scheduled to be published this week. We will begin posting our ratings of 4Q2014 during the week of Nov 3, 2014.

The key is to align the economic news items with the weighted average to determine their impact on GDP. We have done just that in estimating GDP growth, utilizing our simple rating model.
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For an explanation of the ratings, please refer to the post describing the Rating System.
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FINAL SUMMARY OF 3Q2014 RATINGS
POSITIVE = 39
NEUTRAL = 22
NEGATIVE = 28
As of October 24, 2014
—————————–

  • Anyway you look at it, inflation is now running at 1.7%, which is the COL increase for Soc Sec. http://t.co/xfUGEmBnX6
    RATING = 2
  • ***************

  • The Conference Board’s Leading Economic Index increased 0.8% to 104.4, indicating continued growth. http://t.co/mSOkAg5Nj9
    RATING = 2
  • ***************

  • Chicago Fed’s Nat’l Activity Index shows economic activity picked up in Sept. Production leads way. http://t.co/4COK13XaMo
    RATING = 2
  • ***************
    @@@@@@@@@@@@@@@

The S&P 500 Recovers 5% of Its 7% Contraction In 1-Week

image6 300x218 The S&P 500 Recovers 5% of Its 7% Contraction In 1 Week

After a 7% Contraction 2-Weeks Ago, the S&P 500 Recovers 70% of its Loss In Weekly Rally

In a slow week of economic releases, the big news is the weekly rally in the S&P 500, recovering over 70% of its 7.4% loss in the previous week. The index is only 2.3% off its all-time high. Is the US Economy that good or are Investors just fickle? We are still forecasting 3% GDP growth for the balance of the year.

The Advance Estimate of 3Q2014 GDP is announced next week. As we saw what happened last quarter, we can expect swings in the 2nd and 3rd Estimates, but growth should settle in at a 3% increase in the Final Estimate to be announced in December. The 4Q2014 GDP Advance Estimate will not be published until January 2015. So what are Investors watching that trigger stock price rallies?

Obviously, Corporation Profits move the stock price trend. They have been running high at record-setting levels with one short blip down earlier this year. Let’s take a quick look.

image7 300x261 The S&P 500 Recovers 5% of Its 7% Contraction In 1 Week

US Corporate Profits are Back on Growth Trend

image8 300x190 The S&P 500 Recovers 5% of Its 7% Contraction In 1 Week

S&P 500 Index Over the Last 10-Years

Although the trend/correlation is very clear, the upward slope of Corporate Profits is not as steep as the S&P 500 graph depicted over the last 5 years. So what else would be driving stock prices higher? Investor Sentiment or Forward Earnings per Share?

We will take a deeper look at the correlation between the S&P 500 Index and Corporate Profits, or more specifically earnings per share, in our next Post.

us-economy-exposed-debt-crisis

Tweet Peeks at 3Q2014 GDP for W/E 10-17-2014

@KeithEOuellette: After a reasonably active 2 weeks of key economic data, the news turned more positive than negative (6 to 3), and our overall rating has swung more to positive for 3Q2014. This past week, the GDPNow Forecast of 3Q2014 came in at 3.0% growth. We continue to believe we will attain 3% GDP growth for the balance of the year.

The key is to align the economic news items with the weighted average to determine their impact on GDP. We have done just that in estimating GDP growth, utilizing our simple rating model.
|
For an explanation of the ratings, please refer to the post describing the Rating System.
|
strong>FINAL SUMMARY OF 3Q2014 RATINGS
POSITIVE = 36
NEUTRAL = 22
NEGATIVE = 28
As of October 17, 2014
—————————–

  • ISM’s Non-Manufacturing (Services) Composite Index is down slightly in Sep’2014. http://t.co/fajHHtTQXl
    RATING = <2>
  • ***************

  • The US Headline Unemployment Rate falls under 6% thanks to a surge in Sept’2014 jobs per the BLS. http://t.co/PuqzZC5e3E
    RATING = 2
  • ***************

  • Real Earnings for Private Employees improves dramatically. The trend continues to move up. http://t.co/nDR2R8tblW
    RATING = 2
  • ***************

  • New Jobless Claims come in at 287,000 and 4-week moving average is at its lowest since early 2006. http://t.co/shE19PSUw7
    RATING = 2
  • ***************

  • Light Vehicle Sales’ long-term trend continues to lead the US Economy since The Great Recession. http://t.co/wqutDEUyek
    RATING = 2
  • ***************

  • The Advance Estimate for September Retail Sales fell 0.3%, which was way below expectations. http://t.co/85lTwyUjda
    RATING = <2>
  • ***************

  • Small Business Optimism drops in Sept based on Oct update to 95.3, a 0.8 point contraction. http://t.co/YH6B89SYsf
    RATING = <2>
  • ***************

  • The Producer Price Index declines for the 1st time in 13-months, and came in at <0.1%> for Sept. http://t.co/v2FHSyhGSL
    RATING = 1
  • ***************

  • Sept’s Industrial Production rebounds 1% mo. over mo. from Aug’s contraction; plus to Big4 growth. http://t.co/XHmdAc2que
    RATING = 2
  • ***************

  • Michigan Consumer Sentiment up to 86.4; highest rating since Jul’07, oblivious to the correction. http://t.co/9x8YtOt7x2
    RATING = 2
  • ***************
    @@@@@@@@@@@@@@@

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