NEW YORK – The U.S. economy grew faster than first reported between July and September but possible cuts in government spending and tax increases early next year could slow its momentum.
Separate data showed the number of Americans filing new claims for unemployment benefits dropped for a second week, unwinding some of the storm-related surge, which has muddled the labor market picture.
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON
"GDP is a good headline number, but when you look into the figures, you see the bulk of the rise is inventory adjustment and a sharp spike in government spending. So I think the market may look past this number, thinking real GDP in the economy is a bit lower. It was also concerning to see consumer spending revised down. On jobless claims, it was encouraging to see it fall below the 400,000 handle, but we're still trying to evaluate the impact of Hurricane Sandy."
PETER CARDILLO, CHIEF MARKET ECONOMIST AT ROCKWELL GLOBAL CAPITAL IN NEW YORK:
"We are starting to see the jobless claims start to readjust to pre-Sandy levels little by little. But the GDP was much stronger than I expected, obviously that is good news for the third quarter. This just adds to the bullish feeling that once Washington resolves the fiscal cliff then we continue to grow at modest rates."
JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDE MARKETS, WOODCLIFF LAKE, NEW JERSEY
"The positive revision to economic growth in the third quarter is consistent with job creation that was almost three times faster than in the previous three months. Despite the effects of Hurricane Sandy the improvement should continue into year end. Good cheer for equities and risk traders, less so for the dollar."
STOCKS: U.S. stock index futures held gains after the data.
BONDS: U.S. bond prices pared losses
FOREX: The euro held gains against the dollar
(Americas Economics and Markets Desk; +1-646 223-6300)