The GDP figures for Q3 showed that the inventory buildup re-accelerated in Q3 amid a slowing in final demand. We already know that factory inventories rose faster by 0.7% mom in September and the Bureau of Economic Analysis (BEA) estimated in its technical note that wholesale and retail inventories will also have increased noticeably. We thus predict that wholesale inventories will have gone up by 0.8% mom again in September.

According to the BEA, real net exports contributed a negative 2.0 percentage points to the change in GDP in Q3, as imports rose much more than exports. Imports are estimated to have fallen somewhat more sharply than exports in September, and thus the trade deficit is likely to have narrowed, albeit only moderately by $0.5bn to $45.8bn. The trade deficit has trended higher since the recession ended in June 2009, and since February 2010 the annual growth rate of imports has been noticeably higher than the exports’ rate.

Import prices declined by 0.3% mom in September, but are likely to have increased sharply in October as crude oil prices went up by about 9% mom in the statistically relevant first third of the month. We predict that import prices will have risen by 1.3% mom in October. As the graph shows, the ISM price component has been going up in the last four months, indicating that the risk of a forthcoming deflationary period has receded somewhat.

Initial jobless claims rose more than expected in the week ending 30 October, by 20k to 457k – slightly above the 4-week moving average. Temporary jobs related to the congressional elections on 2 November could have disappeared, and thus we expect jobless claims to have remained elevated in the week ending 6 November, even though they could have fallen slightly to about 450k.

The Congressional Budget Office (CBO) estimates that the budget deficit in October, the first month of the new fiscal year 2011, will have amounted to $140bn. This would be $37bn less than in the same month of the previous year, due to higher revenues and lower outlays in particular.

In October, the University of Michigan’s consumer sentiment dropped by 1.5 points. The final data was revised downward slightly by 0.2 points from the preliminary level, as expectations were lower and the current assessment higher than initially reported. Nevertheless, consumers’ outlook improved compared to September, even though it remained downbeat because of the ongoing weakness of labour and housing markets in particular. We expect consumer sentiment to have remained more or less unchanged at 67.7 points in early November. The current low level of the weekly ABC consumer comfort index also suggests that UMI’s consumer sentiment is unlikely to have improved noticeably. However, the last labour market report showed a rise in private payrolls of 159k, which could have had a favourable impact on consumer sentiment.

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