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Friday, October 28, 2011

Surprise, surprise: US data surprises--on the upside. World does not end

From UBS:

++ Faster GDP, consumption, & capex growth
++ Q3 GDP +2.5%, jobless claims slipping, PHSI -4.6%:

--Real GDP rose at a 2.5% annual rate in Q3 (cons 2.5%, UBSe 2.7%). Consumer spending accelerated to an above-expectation 2.4% pace (cons & UBSe 1.9%) from a 0.7% pace in Q2; and business fixed investment picked up to a 16.3% pace from a 10.3% pace. Residential investment rose 2.4%-the second consecutive increase-complementing the stronger household spending growth shown in PCE. Offsetting the greater strength in consumption and capex than we had expected was a bigger drag from inventories, which subtracted 1.1 pct pt from growth. Prices rose in line with expectations: GDP prices up 2.5% and core PCE +2.1%.

--With the drag from inventories (and only a 0.2 pct pt add from exports), final sales and domestic final sales were stronger than overall GDP: Final sales picked up to a 3.6% pace from a 1.6% pace and domestic final sales to 3.2% from 1.3%.

--All in all, a solid report: The strength in consumption and capex indicate decent momentum, and slower inventory investment spells (eventually) stronger production...On net, we maintain our forecast for real GDP growth at a 2.0% annual rate in Q4. However, the Q3 pace does boost calendar average growth to 1.8% from 1.6% for 2011 to 2.3% from 2.2% for 2012.

+ Initial jobless claims edged down to 402k (cons: 401k, UBSe: 400k) from 404k (was 403k) the prior week. The four-week average was essentially unchanged from the prior week and down from 418k a month ago.