HALLOWEEN RALLY
Submitted by The Capital Spectator
In the wake of today’s 25-basis-point cut in interest rates by the Federal Reserve, the not-so-subtle message is that the economy will weaken. But the cut comes just hours after the Bureau of Labor Statistics told us that economic growth was higher than expected in the third quarter at a respectable 3.9%. Not only is that slightly faster than the annualized real 3.8% growth in the second quarter, that’s the fastest pace since Q1 2006.
Of course, no one expects that the 3.9% is a prelude to something better, or even the standard for the foreseeable future. The Fed, to cite one source, expects the economy to slow. If a downshift is coming, diminished consumer spending will be the reason, probably due to the ongoing fallout from housing.
But there was no sign of that in today’s GDP report. In fact, personal consumption expenditures, which are GDP’s driving force, jumped 3.0% in Q3. What’s more, consumer purchases of durable goods rose at an even faster pace, ascending 4.4%–well above the economy’s overall rate of expansion.
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