According to the preliminary report, third quarter GDP contracted by 0.5% while the BEA advance report showed a contraction of 0.3% in GDP. Looking at the details, personal consumption was downwardly revised (-3.7% from -3.1%), while private investment was upwardly revised (0.4% from -1.9%) due to residential investment showing a less severe decline (-17.6% from -19.1%). The lower level of Q3 GDP was also due to a wider net export deficit than estimated a month ago and slower pace of inventory liquidation. GDP is expected to drop further in the fourth quarter of 2008 and in the first half of 2009 as the headline decline was still mitigated by government consumption, net exports and inventories.
The S&P Case Shiller house price index fell 17.4% Y/Y in September, more than the consensus estimate of -16.9% Y/Y. The three months annualized figure deteriorated sharply from -9.16% to -14.02%, but is still below the peak of -24.88% reached in March. These figures show a little acceleration in the month-on-month declines probably due to the increased turmoil in financial markets (decline credit availabilityconsumer confidence at rock bottom levels because of fears about unemployment).
The OFHEO house price index dropped 1.3% M/M in September, while an outcome of -0.7% M/M was expected. The previous figure was downwardly revised from - 0.6% M/M to -0.8% M/M. Home prices showed a record drop and the seventh decline in a row which indicates that housing market conditions are deteriorating and a recovery is not yet around the corner.
The Richmond Fed manufacturing index declined to -38 (from -26) in November while the consensus was seeking for only a more moderate drop (-27). The details showed a bleak picture as shipments (-31 from -24), new orders (-48 from -35), number of employees (-32 from -15) and average workweek (-30 from -14) all weakened sharply. Both prices paid (1.51 from 3.66) and prices received (-1.19 from 2.06) came down sharply. It is however important to note that manufacturers became more confident about their business prospects for the coming six months, albeit from historical all-time lows. .
Consumer confidence (Conference Board) rose from an upwardly revised 38.8 in October to 44.9 in November, while the consensus was looking for an outcome of 38.0. The expectations sub-index improved (46.7 from 35.7), while the present situation showed a slight decline (42.2 from 43.5). Consumers were more pessimistic about labour market conditions, but the outlook for the labour market improved. While encouraging, the still very low level of confidence suggests that the impact of the rise on spending won’t be substantial.
