Instant View: GDP growth revised up, jobless claims fall

NEW YORK Thu Nov 29, 2012 9:08am EST

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NEW YORK (Reuters) - The U.S. economy grew faster than first reported between July and September but possible cuts in government spending and tax increases early next year could slow its momentum.

Separate data showed the number of Americans filing new claims for unemployment benefits dropped for a second week, unwinding some of the storm-related surge, which has muddled the labor market picture.

COMMENTS:

JOSEPH CARSON, U.S. ECONOMIST AND DIRECTOR OF GLOBAL ECONOMIC REEARCH, ALLIANCEBERNSTEIN, NEW YORK:

"The GDP revision was not surprising. We had stronger export performance and inventory build but it seems the inventory build was intentional since orders rose in October. The jobless claims numbers are still volatile due to the hurricane. We expect contraction in November payroll employment based on dislocations from the hurricane and then some strong recoveries in payroll growth in December and January. If you look at the GDP data, the public sector grew 3.5 and private sector grew 2.1 percent, but on year-on-year basis, the private sector grew at a 3 percent rate.

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

"Both sets of numbers were pretty close to estimates. With jobless claims, you are still seeing the effects from Sandy, but you should see them come down in the couple of weeks. You saw the same thing happen with Katrina when you saw claims spike up because people couldn't file the claims (in the previous weeks).

"The spike in claims could show up in the next payroll report. The Beige Book didn't paint a very rosy picture on the jobs market. The trend in hiring is still relatively low.

"With GDP, the headline is higher than the initial estimate, but the details were disappointing. We saw downward revisions in two key components, consumer spending and business investment.

"The slowdown in consumer spending from Sandy might subtract a few tenths of a percent in GDP for the fourth quarter. Also firms just don't want to expand in this environment."

OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON

"GDP is a good headline number, but when you look into the figures, you see the bulk of the rise is inventory adjustment and a sharp spike in government spending. So I think the market may look past this number, thinking real GDP in the economy is a bit lower. It was also concerning to see consumer spending revised down. On jobless claims, it was encouraging to see it fall below the 400,000 handle, but we're still trying to evaluate the impact of Hurricane Sandy."

PETER CARDILLO, CHIEF MARKET ECONOMIST AT ROCKWELL GLOBAL CAPITAL IN NEW YORK:

"We are starting to see the jobless claims start to readjust to pre-Sandy levels little by little. But the GDP was much stronger than I expected, obviously that is good news for the third quarter. This just adds to the bullish feeling that once Washington resolves the fiscal cliff then we continue to grow at modest rates."

JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDE MARKETS, WOODCLIFF LAKE, NEW JERSEY

"The positive revision to economic growth in the third quarter is consistent with job creation that was almost three times faster than in the previous three months. Despite the effects of Hurricane Sandy the improvement should continue into year end. Good cheer for equities and risk traders, less so for the dollar."

MARKET REACTION:

STOCKS: U.S. stock index futures held gains after the data.

BONDS: U.S. bond prices pared losses

FOREX: The euro held gains against the dollar

(Americas Economics and Markets Desk; +1-646 223-6300)

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