Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  Real GDP Was Revised to a 3.9% Annual Growth Rate in Q3
Posted Under: Bullish • Data Watch • GDP • Government • Fed Reserve • Interest Rates
Supporting Image for Blog Post

 
Implications: The bull market will continue to run. Forget the surprise upward revision to real GDP for a second. The best news in today's report was that corporate profits grew at an 8.6% annual rate in Q3 and are at a new all-time record high. Ultimately, high profits are why equities are undervalued and today's data supports further equity gains in the year ahead. The government's measure of profits fell steeply in Q1, but the sharp rebound in the past couple of quarters suggests the drop was weather-related, just like the temporary drop in real GDP. The economy grew at a 3.9% annual rate in Q3, which is an improvement from the 3.5% rate reported a month ago. In the past year – which includes the weather-related problems in Q1 as well as the rebound – real GDP is up 2.4%. Real GDP is up at a 2.3% annual rate in the past two years, the same exact pace since the recovery started in mid-2009. However, we expect the pace of real GDP growth to pick up for the next couple of years. Nominal GDP (real growth plus inflation) was revised up to a 5.3% annual rate in Q3 from a prior estimate of 4.9%. Nominal GDP is up 4% from a year ago and up at a 3.9% annual rate in the past two years. These figures show the Fed's target of essentially zero for short-term interest rates is too low and monetary policy is too loose. On the housing front, the national Case-Shiller index, which measures prices across the country, increased 0.7% in September and is up 4.8% from a year ago. The largest gains in the past year have been in Miami, Las Vegas, and San Francisco. The FHFA index, which focuses on homes financed with conforming mortgages, was unchanged in September but up 4.3% versus a year ago. In the year that ended in September 2013, the Case-Shiller was up 10.6% while the FHFA was up 8.3%. In other words, price gains have continued in the past year but at a slower pace. For the year ahead, prices will keep working their way higher but at an even slower pace, more like 3 – 4%. In other news this morning, the Richmond Fed index, a measure of mid-Atlantic manufacturing sentiment, fell to +4 in November from +20 in October. So factory activity is still expanding, just not as quickly.

Click here for PDF version
Posted on Tuesday, November 25, 2014 @ 10:18 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2022 All rights reserved.