US Spending and Orders hint at slightly stronger Q4 – Capital Economics (Barcelona) - Paul Ashworth, Chief US economist at Capital Economics notes that taken together, November's personal income/spending and durable goods reports suggest that fourth-quarter GDP growth will be a little stronger than we previously thought. After falling by 0.2% m/m in October, real personal spending rebounded by a strong 0.6% m/m in November, suggesting that Sandy may have been behind October's dip.

He believes that the drop back in gasoline prices probably helped too, which largely explains the 0.2% m/m decline in the PCE deflator. Real personal disposable incomes also increased by a sizeable 0.8% m/m last month, again suggesting some post-Sandy bounce back after October's 0.1% m/m decline. Elsewhere, headline durable goods orders increased by 0.7%m/m in November. Stripping out the 13.9% m/m drop in the volatile commercial aircraft orders component, core orders increased by an even bigger 1.6% m/m.

The really good news in his view is that non-defence capital goods orders (ex. aircraft) increased by a strong 2.7% m/m in November, while October's gain was revised up to 3.2% m/m, from 2.9%. Shipments in the same category increased by 1.8% m/m in November and October now shows a 0.6% m/m gain, compared with the earlier estimate of a 0.1% fall.

Ashworth finishes by writing, “The upshot is that it now appears that fourth-quarter real consumption is on course to increase by as much as 2.0%, we previously had 1.5% penciled in, and business investment in equipment and software, which we had assumed would contract, may now post a modest gain. As a result, we now estimate that fourth-quarter GDP growth will be between 1.5% and 2.0%.”