US Economic Update – 28 November 2014

US economic growth revised higher for previous quarter; data continues to point toward a strong start to fourth quarter

The Dow Jones closed just over 1% higher for the week on Friday as an upward revision to GDP numbers for the previous quarter, along with higher than expected PCE inflation figures for October, saw investor sentiment remain bullish.

In detail, the second estimate for US GDP figures came in at 3.9%, significantly higher than the 3.5% implied by official projections.

In addition to stronger output during the previous quarter the Federal Reserve’s preferred measure of inflation, the PCE price index, also rose unexpectedly during October. Both the PCE index as well as the Core PCE index rose during the period, with PCE reaching 1.4% and the Core index accelerating to 1.6%.

The Bureau of Economic Analysis, which publishes the figures. estimated that the increases were due to 0.2% rise in personal disposable incomes being matched by an equal 0.2% rise in personal consumption expenditures. It also singled out the manufacturing and services industries as leading contributors to the gains.

All in all, the data emerging for the current quarter continues to suggest a strong start to Q4 for the US economy, while recent revisions to GDP point towards an underestimation of output in the previous quarter.

In addition to this, lower oil prices also look set to continue as a factor and although a negative development for producer companies; manufacturing, transport groups and consumers should benefit over the near term at the very least.

As a result, it appears that the ongoing bullishness of US equity investors could be here to stay well into the closing stages of the year, with many remaining optimistic on the full year outlook for the economy despite a terrible first quarter.

Looking ahead, the week in front sees another round of PMI surveys released in addition to November unemployment, payrolls and trade balance data.

Dow Jones Industrial Average // 10 Minute Intervals

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