Reports on October personal income and construction spending prompt Action Economics to slash its GDP forecast for the quarter to 0.5%Perhaps it's a fitting end to a month that saw so much volatility and confusion. Two U.S. economic reports released on Nov. 30—on personal income and construction spending for October—took a hefty chunk out of Action Economics' fourth-quarter gross domestic product estimate, which now sits at 0.5%. We lowered our view from the 1.5% annual rate we adopted on Nov. 29 after the robust 4.9% reading for GDP in the third quarter that already looks poised to be boosted to 5.0%.
The two reports have sharply raised the downside risk to fourth-quarter GDP, and this may feed expectations of a jumbo rate cut from the Federal Reserve in December. Though GDP will average a solid 2.7% rate in the second half of 2007, the market will be fixated on the drop in the growth rate between the third and fourth quarters, as well as the risk of a negative reading for the headline GDP figure in the advance fourth-quarter GDP report at the end of January.
Another Nov. 30 report, the Chicago purchasing managers' index for November, provided some solace, as it posted a comfortable upside surprise. Here is Action Economics' rundown of the Nov. 30 reports:
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