Much of the upward revision to real GDP and real final sales stemmed from the larger increase in personal consumption expenditures than previously estimated. Partly offsetting this gain were downward revisions to nonresidential fixed investment and private inventory investment. Personal consumption expenditures now contributed 1.89 pp to third-quarter GDP, up from 1.47 pp in the advance estimate. Consumption of both goods and services moved higher than in the early report. The contribution from gross domestic private investment fell to 0.34 pp from 0.52 pp, mostly due to a markdown in nonresidential structures.
Residential investment was still a drag on growth, but less so after revision and less so than in the second quarter. It subtracted 0.17 pp from growth in the third quarter, a bit better than the 0.24 pp drag first reported and notably better than the 0.31 pp drag in the second quarter.
The change in private inventories added 0.49 pp to third-quarter growth, down from 0.61 pp in the advance estimate. We think the smaller inventory rebuild gives the economy more of a runway in the fourth quarter, as firms are more likely to increase production in response to rising aggregate demand.
The Conference Board's Consumer Confidence Index rebounded sharply to 107.1 in November, a 6.3-point increase over October's upwardly revised level of 100.8 (previously 98.6). Both the present situation and expectations sub-indices moved smartly higher this month. The present situation index rose 7.2 points to 130.3, with October's index revised 2.5 points higher to 123.1. The expectations index added 5.7 points to 91.7, though October's index was revised higher by 2.1 points to 86.0. Those expecting fewer jobs in the next six months fell to 13.8%, the smallest since July 2004. Despite the demand-pull inflationary nature of tight labor markets, expecations 12 months hence fell back to 4.7%, tied with February and July as the lowest since early 2007. The 2015 average expectation was 5.0%.
Fed Governor Jerome Powell said that while the has so far been wise to be patient on policy, moving too slowly as continues to rise could leave it scrambling. He added: “In my view, the case for an increase in the federal funds rate has clearly strengthened since our previous meeting earlier this month.”
Our EUR/USD short was closed after the rate came back to 1.0665 today. The rate broke above 7-day and daily is biased up again. This suggests the EUR/USD is likely to recover slightly in the coming days. We think there is scope for gains to 1.0840. We switched to long at 1.0645 today.
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