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GDP and More Positive Data

This article is more than 10 years old.

Q3 US GDP growth came in at 2.5%—in line with analyst estimates but certainly much faster than what media headlines predicted. All year, folks have feared a recession ahead—the so-called “double dip” (which are predicted vastly more than they’re ever seen). GDP is the big headline grabber—but it’s far from the only sign the world is not only healthier than most think, but in fact reaccelerating.

Yes, Q3 growth near doubled the Q2 rate, but Q2’s 1.3% was still an acceleration from Q1’s slow (but still positive) 0.4%—a point most miss. Then there was the Philadelphia Economic Index—an indicator for general economic health—which increased to 8.7 in October from -17.5 in September—the biggest one-month rebound in 31 years. US industrial production rose 0.2% in September over August and 3.2% over 2010—led by manufacturing (which many oddly continue to believe is so weak). Though many fear consumers can’t spend, retail sales grew 7.7% in September over 2010—led by big ticket items like cars. The Institute for Supply Management (ISM) index of factory activity surprised—rising to 51.6 in September and accelerating from August’s 50.6. (Anything over 50 signals expansion.) Housing remains a weak spot—but housing starts jumped 15% from August to September.

That’s in the US, but the world overall is much healthier than headlines imply. Eurozone industrial production (IP) rose 1.2% in August over July and 5.3% over 2010—beating expectations. Germany’s IP shrank -1% over July, but grew 7.9% over 2010. Japanese machine orders—a key leading economic indicator—crushed expectations growing 11% in August (month over month) and 20% in September. Japanese domestic demand was strong (thanks to reconstruction) but so was foreign demand—foreign machine orders grew 32% and 16% in August and September respectively. Though many feared a Chinese hard landing, Chinese Q3 GDP grew 9.1%—slower than the previous quarter, but still very fast. UK exports rose 0.6% in August over July. The £25.5 billion exported was the highest total since records began in 1998—a sign of strong global demand. And these are just a smattering of examples.

Yes—there are negatives. But even in periods of the most robust global growth there will be weak spots. Unemployment remains high globally, but unemployment is symptom of past economic weakness, not an indicator of future weakness. Greece is a trial—but a well known one—and it now appears the eurozone has finally agreed to a plan to shore up the periphery and protect against a major liquidity event for some time. That so many positive factors exist is bullish. That they are so little talked about is even more bullish. That gap between too-dour sentiment and better-than-realized reality is a powerful positive factor for stocks through yearend and well into 2012.

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Money manager Ken Fisher’s latest book is Debunkery: Learn It, Do It, And Profit From It–Seeing Through Wall Street’s Money-Killing Myths (John Wiley, 2011). Visit his archive at www.forbes.com/fisher.