Economic News Turns Mostly Positive

Yesterday, we learned that third-quarter GDP was revised down to 2.8% from the preliminary estimate of 3.5%. The primary reason for the revision had a lot to due with lighter consumer spending (revised down to 2.9% from 3.4%).

This news weighed on the stock market, but you have to remember that the third quarter is still the first quarter of positive growth after four consecutive quarters of declines. The economy is clearly on the road to recovery, and this is a very positive step in the right direction.

In fact, more economic news emerged today that put investors on an even keel just before the long holiday weekend. Today, the Commerce Department reported that personal income increased 0.2% in October, fueled largely by a 0.7% increase in consumer spending. This is great news, especially as we head into the holiday shopping season.

The other story making headlines today is that weekly jobless claims dropped (by 35,000) to the lowest level (466,000) since just before the Lehman Brothers collapse in September 2008. The thing to watch for in the weeks and months ahead is consistency, but the trend in claims is rapidly improving by the day.

I expect as payrolls level off in the coming months and the unemployment rate starts to moderate, consumer spending will also improve, which bodes well for the recovery (since consumers account for 70% of overall economic activity).

More Louis Navellier



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