Friday’s Economic Data: Green Light for QE2

financeBy Seeking Delta of

(This article was first published friday October 29,2010)

There was no shortage of economic data released today however there were no major moves in the indices as everyone seems to be waiting for the Fed’s announcement next Wednesday. Released today were GDP, Employment Cost Index, Consumer Sentiment and Chicago PMI. Let’s have a look in that order.

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GDP came in at 2.0% growth quarter over quarter (SAAR) which was in line with expectations. Personal consumption showed surprising strength, contributing 1.8% to growth with change in inventory levels also contributing 1.4%. Inventory restocking continues to be a strong contributor to GDP growth since late 2009 and it remains to be seen how long this will last. GDP continues to growth albeit at a rate slower than typical recoveries. For further reading on what the Consumer Metrics Growth Index says about Q4 GDP, see here.

real gdp 2010
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Employment Cost Index

As of Q3’10, quarter over quarter growth rate in Employment Compensation has slowed to .4% from .5% and .6% in the prior two quarters. Consensus for Q3 was .5%. Wages and Salary quarter over quarter % change was .45%. It has remained in a tight range, from .36%-.45% from the past 5 quarters. There continues to be no strong rebound wage increases with employment costs remaining under 2% year over year. Again this is not indicative of a strong economic recovery.

employment compensation 2010
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Consumer Sentiment

The composite sentiment index is down .5 points in October to 67.7 from September’s 68.2 reading. Consensus was for a 68.0 reading. The expectation component fell 2.7 points from mid-month to a 61.9 level. October final reading at the 67.7 level is the lowest since Nov’ 09, prior to that you have to go back to the ’91-’92 recession and Gulf war to find similar levels.

university of michigan consumer sentiment october 2010
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Chicago PMI

The Chicago PMI remained strong with a 60.6 reading versus the consensus of 57.6. New orders were strong with a reading of 65, over 3 points greater than the prior month. A reading over 50 signifies expansion while below 50 signifies contraction.

ism chicago business barometer october 2010
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Overall there were no huge surprises out of today’s data; GDP was in line with consensus, Employment Cost and Consumer sentiment slightly below and Chicago PMI above. These levels indicate an economy that is growing although not at a rapid rate with certain leading indicators (ECRI and CMGI) and the possible closing stages of the inventory contribution to GDP suggesting slowing from the already tepid recovery. All ears will be tuned in to the Fed’s announcement next Wednesday and it doesn’t appear the economic data will give Bernanke any pause in resuming Quantitative Easing.