In the current atmosphere, excess oil is only a concern for those directly involved in the industry. Rafts of global economic data paint a confused picture, and the “new normal” of just a few years ago seems not to matter now. We have gone back the “old normal” wherein the US is expected to lead the world economies, dragging even the Chinese higher with us. After all, we have flagging economies in Europe, Japan, China, and the rest of the emerging world, yet the US economy continues to plod higher. Is there justification for this?
Third quarter US GDP was recently revised upward from 3.5% to 3.9%, and further revision is expected to take that number over 4%. Furthermore, the details of the numbers are supportive of continued growth over 3.5% in the fourth quarter. Consumption was revised upwards by 40 basis points (four-tenths of one percent) to 2.2%, and non-residential fixed investment was revised upwards by 160 bps to 7.1%. Taken together these two series added 50 bps to the GDP numbers. This was accompanied by improved demand, with final sales to domestic purchasers up 3% last quarter. This means that production will have to rise to meet demand, which means that faith in the US economy is not misplaced, at least over the next 3 months or so.
Next week is a full week, with two manufacturing index reports on Monday; motor vehicle sales and construction spending reports on Tuesday; jobless claims on Thursday; and, reports on international trade and factory orders on Friday.