The Bear Case For Q4 Is Officially Doomed

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Photo: MSNBC

OK, it’s not as though anyone is really predicting a horrible Q4, but the big question mark going into the quarter was whether end demand would hold up, in light of all the inventory build.Well, it is.

Ellen Zentner of Mitsubishi Financial extrapolates on this morning’s retail sales:

Earlier reports from retailers on a strong turnout of holiday shoppers translated into big retail sales figures for November.  The U.S. Department of Commerce reported that retail sales advanced by +0.8 per cent
in November.  Excluding autos they were up an even stronger +1.2 per cent. On top of the strong November figures, October sales were revised sharply higher, to +1.7 per cent for headline (originally reported as +1.2%) and +0.8 per cent for x-auto (originally reported as +0.4%).  All in all, October’s upward revision combined with November’s results imply that real consumer spending in the fourth quarter accelerated at a rate of about +3.5 per cent compared to +2.8 per cent in the third quarter.  Overall economic growth in the fourth quarter is now tracking comfortably above +3.0 per cent, assuming that the consumer doesn’t suddenly fall on their
face in December.  That scenario isn’t likely as tax clarification, that also includes an extension of unemployment benefits, is rolling in to save the day and lift confidence among consumers and businesses alike.

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