Wednesday, October 31, 2007

The Game's Afoot

The initial third quarter GDP number is in this morning at a smoking 3.9%, well above the consensus forecast of 3.2%, driven in part by a very large increase in exports (16% on an annualized basis), the biggest increase since the beginning of 2003 (underestimating export growth seems to have caused forecasters to underestimate GDP growth for over a year now).

Later today of course, the FOMC will announce whether they will feed or starve the beast of "the markets" with another rate cut. Last time the Fed made a bold half point cut in the face of the alarming (and ultimately incorrect) news of a negative jobs number. When the jobs figure was revised upward KPC wondered if the Fed had panderer's regret.

This time it will be interesting to see if the Fed will cut again in the face of such a strong current growth number. Ironic symmetry would require them not to cut only to see this number then revised substantially downward!