Prior Week Summary
It was another relatively light week for economic data here in the U.S., with a strong headline print for third quarter GDP setting the stage. The Commerce Department report detailed that the economy expanded at an impressive 2.9% seasonally adjusted annual pace in the third quarter after averaging closer to 1% growth during the first half of the year. The strength of the report surprised economists, who had forecast for a growth rate of 2.6% on average. Notably, the report detailed a strong demand for our export goods, which grew at a 2.7% annualized pace in the third quarter, after a few consecutive quarterly losses.
On the other hand, personal consumption, which supports about 2/3rds of GDP slowed to 2.1% in the third quarter, after a massive 4.3% increase in the second quarter. Similarly, the core PCE measure decelerated to a growth rate of 1.7%, falling 0.1% from the prior quarter.
Separately, news from the housing markets was encouraging, as both new home sales and pending home sales increased on a month-over-month basis in September. New Home sales increased by 3.1% while pending home sales grew at a 1.5% pace.
Overall, the last week of the month put the exclamation point on the recent curve steepening trend, as the 2s/10s Treasury spread expanded by greater than 16 basis points in October, as expectations for future inflation risk increase from relatively subdued levels.
The Look Forward
Macroeconomic fundamentals will likely take a back seat this week to any news relating to the U.S. Presidential election, which is saying a lot for a week that includes an FOMC meeting on Wednesday and non-farm payrolls on Friday. BOO!