December 4, 2007—Both personal income and consumption rose 0.2% in October. The GDP grew 4.9% in the 3^rd quarter and has increased 2.8% on a year-ago basis. New home sales increased 1.7% while sales of existing homes fell 1.2%. Both new and existing home sales are down significantly compared to last year. Last, durable goods orders declined an unexpected 0.4% in October.

Gross Domestic Product
The 'preliminary' estimate by the BEA indicates that the GDP grew 4.9% in the 3^rd quarter, up from the 3.8% growth during the 2^nd quarter. GDP growth was driven by strong consumer spending as well as a large improvement in exports. Despite the growth, the overall economy is still soft, as the weak housing market continues to be a significant negative weight. Corporate profits fell $19.3 billion to $1.623 trillion. We expect GDP growth should be weak in the 4th quarter.

Personal Income
Personal income rose a paltry 0.2% in October, down from the 0.4% increase in September. Personal consumption also grew 0.2%. On the inflation front, the top-line PCE deflator increased 0.3% while the core PCE deflator, which excludes food and energy prices, rose 0.2%. On a year-ago basis, the PCE deflator has increased 2.9% while the core PCE is up 1.9%, which is within the Fed's comfort level. Last, the saving rate worsened in October, falling to 0.5%.

New Home Sales
New home sales rose 1.7% in October to 728,000 units (seasonally adjusted annual rate). Despite the increase, sales on a year-ago basis are down 23.5%. The median sale price of a new home was $217,800 in October, down from $238,400 the previous month. Last, inventories fell 5.6% to 8.5 months of supply, but compared to a year ago are up 19.7%.

Existing Home Sales
Sales of existing homes fell 1.2% in October to 4.97 million units (seasonally adjusted annual rate) and are down 20.7% on a year-over-year basis. Concurrently, the median sale price for an existing home fell 1.2% to $207,800 and is down 5.1% compared to last October. Inventories rose 1.9% to 4.5 million units, or 10.8 months of supply. 'Months of supply' is up 45.9% compared to October 2006. Overall, the housing market remains very weak.

Durable Goods
New orders for durable goods declined an unexpected 0.4% in October following a 1.4% decrease in September. Concurrently, new orders for core capital goods, which signify business investment in equipment and software, decreased 2.3%.  Inventories and unfilled orders both grew in October, rising 0.2% and 1.0%, respectively. Last, shipments grew 0.6%.