What You Need to Know (Before You Go)

With the shortened trading week, it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here. Let’s take a look at this week’s big headlines, starting with today’s big GDP report:

U.S. Growth Breaks Through 5% For Q3

The Commerce Department revised its third-quarter GDP estimate sharply higher this morning. The U.S. economy expanded at a 5% rate in the third quarter, up from the previous estimate of 3.9%. This trounced economists’ estimates for 4.3% growth. Much of the strength in the quarter was attributed to consumer spending and business spending. This marks the U.S. economy’s fastest growth pace in more than a decade, and bodes well for further economic strength in the current quarter.

New and Existing Home Sales Cool Down in November

The Commerce Department reported that new home sales declined 1.6% in November to a seasonally adjusted annual rate of 438,000. Economists were looking for an increase to a 460,000 annual rate. October sales were revised down to a rate of 445,000. While it’s disappointing to see new home sales decline for two straight months, we need to remember that new home sales tend to be volatile—and the U.S. housing market is slowly recovering, mainly due to sluggish wage growth.

The National Association of Realtors announced on Monday that existing home sales dipped 6.1% to an annual rate of 4.93 million units in November. Economists were looking for a drop to a 5.20 million unit pace. Housing inventory at the end of November fell 6.7% to 2.09 million, which is a 5.1 month supply at the current pace. Existing home sales dropped to a six-month low last month, mainly due to low inventories, which are at an eight-month low. A shortage of properties is keeping buyers on the sidelines.

Defense Spending Drags Down Durable Goods Orders

In November, orders for durable goods slipped 0.7%, which surprised economists who were looking for a 3% gain. Defense-related goods fell 8.1% last month, while non-military goods excluding aircraft remained unchanged. Business investment spending was flat in November. This marked the third decline in durable goods orders in the past four months, and was mainly due to the drop in demand for defense-related goods.

Consumer Wages and Spending Tick Up

In November, personal income increased 0.4%, missing analysts’ estimates for a 0.5% rise. October’s figure was revised to 0.3%, up from 0.2%. Personal spending rose 0.6% last month, up from 0.3% in October and beating economists’ forecast for a 0.5% increase. While personal income was only slightly better than forecast, we’re starting to see the U.S. consumer spend more, thanks to lower gasoline prices.

Consumer Sentiment Reaches 8-Year High

The University of Michigan’s Consumer Sentiment Index increased to 93.6 in December, up from 88.8 in November. This was slightly higher than economists’ forecast for 93.5. The consumer expectations index increased to 86.4, up from 86.1, while the current conditions index slipped to 104.8, down from an earlier 105.7 reading. This was a very positive reading. The U.S. consumer hasn’t been this confident since January 2007—so we should see a strong start to the New Year.

As a reminder, Wall Street will close at 1:00 P.M. EST on Christmas Eve (tomorrow), and will be closed on Christmas (this Thursday). I’ll be in touch tomorrow with your Stock of the Day and daily blog, but then I’ll sign off for the week to spend time with family.

Happy Holidays!

Louis Navellier

Louis Navellier

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