WASHINGTON — The U.S. third-quarter gross domestic product revision was up 4.9%, the same pace as in the prior report, but the components were slightly more favorably aligned and the price indexes slightly more troubling. Even with the revision, it is clear that fourth-quarter real growth is slowing and most analysts expect a slower economy to damp inflation, which is a lagging indicator. Consumption was revised up in the third quarter and inventories were revised lower for a more favorable growth mix that put real final sales at up 4.0%, up slightly from the prior estimate. The Commerce Department said the upward revision to consumption reflected new retail sales data for September, and the downward revisions to inventories were in autos, also for September.Core PCE prices now stand at up 2.0% (revised up 0.2 point) and up from a 1.4% rise in the second quarter, but GDP core prices were slightly lower at up 1.7%. The Commerce Department said new Fed bank call report data raised prices for banking services. Higher energy prices and a lower dollar will raise inflation ahead, but if demand falters the rise will not go far. Corporate profits before tax are now negative $51.8 billion as financial and manufacturing profits fell. Early profit reports for the fourth quarter are weak, with financial firms again faltering as credit exposure is written down.There is nothing to trade from this report unless one wants to worry about the price revisions. Banking services prices are imputed from short interest rates (which did not fall until late in the third quarter) and the level of bank assets (which were rising as investors moved to safety). Their rise is probably not a major inflation warning. U.S. fourth-quarter growth is clearly weaker, but the exact pace of growth depends importantly on holiday sales results, which are still coming in. Third-quarter real final sales advanced 4.0%, an acceleration that suggests there was some momentum in the economy before the holidays.— Market News International
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