To the surprise of economists, the final estimate of 3rd quarter GDP was cut by another 0.2% to 1.8% for the quarter, well below the initially reported growth of 2.5% for the quarter.
Consumers spent less during the quarter than previously reported, although indications are that they have been spending more freely in the buildup to the holidays. Much of the revision was directly attributable to a substantial downward revision to consumer spending on healthcare.
The shine continues to come off what was initially believed to be a much better quarter for economic growth. Still, expectations for fourth quarter growth remain optimistic.
The true test for consumer resilience will come over the next few months after the holiday shopping season has ended. If consumers pare back their spending again after the holiday spending blitz ends, the overall pace of economic growth will likely slow again as well.
Today’s report on initial jobless claims was also a positive development. The downward trend in jobless claims in recent weeks is an encouraging sign that employers are cutting less and the long-stagnant jobs market may be finding its footing.
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