Most investors don’t know it, but wholesaling used cars is a red-hot business. This is why Cop...
Look for this week to end with a bang: We get first-look third quarter GDP numbers on Friday.
10/26/2010 2:16 pm EST
The big number comes on Friday, October 29, with the first estimate of third quarter GDP. Economists surveyed by Bloomberg project 2% growth from the third quarter of 2009. That would be a significant gain from the 1.7% annual growth rate in the second quarter.
That kind of increase in economic growth would be a confidence builder for investors at a time when so many are expecting growth to slump until the middle of 2011. I don’t think it would be enough to change the Federal Reserve’s decision on the need for a new program of quantitative easing to support economic growth by driving down medium- and long-term interest rates. For one thing, a 2% growth rate isn’t enough to significantly lower the number of unemployed. But I do think an increase to 2% would diminish remove worries about a double-dip recession.
The Bloomberg survey of economists also shows them projecting that the improved growth rate is coming from a pickup in consumer spending. Economists project that consumer spending grew by a 2.4% annual rate in the third quarter. The National Retail Federation has forecast that November- December sales will rise by 2.3 percent from sales during the same period in 2009. That would make 2010 the best holiday shopping season in four years.
Investors will get a preview of Friday’s third quarter GDP numbers on Wednesday, October 27 when the U.S. Department of Commerce reports durable goods orders. According to economists, durable goods orders climbed 2% in September. That would be the most in five months.
Take a look below the headline number to a subcategory, orders of business capital goods. This part of the durables number measures equipment that business is ordering to expand or modernize production. Orders in this category grew by 4.1% in August and economists are looking for a similar pickup in September.
Businesses don’t invest unless they think that the economy is revving up. They can be wrong, of course, but business investment is generally a reliable indicator of economic direction.
Positive numbers from GDP and durables would be a good reason for the current rally to continue into the fourth quarter of 2010.
Related Articles on STOCKS
That doesn’t mean Best Buy (BBY), Target (TGT), Macy’s (M), Home Depot (HD) or others ar...
For those new to trading, new to me, or my methodology, I think the following ground rules will help...
When it comes to new technology, nothing’s quite as cutting edge as driverless cars, or autono...