We got revised numbers on third quarter GDP today and, as ever, this more accurate data is more informative than the newsier initial estimates that came out last month. One key headline is that real GDP grew 2.7 percent and not 2 percent as initially recorded. To be a bit flip about it, that’s your election result right there.
I was also interested to see that on the nominal side, the revised current dollar GDP growth estimate is 5.5 percent. That’s significant. The pre-crisis trend was for nominal income to grow at about five percent per year. Then we fell way below that level during the peak crisis years, and never had the kind of sustained nominal bounce-back that would bring us back to trend. Q3’s reported 5.5 percent nominal growth isn’t a crazy-high figure or anything, but it is a catch-up kind of number. With the Federal Reserve’s new communications framework in place and a somewhat more dovish lineup at the wheel in 2013, hopefully we’ll keep seeing nominal growth above 5 percent for a while which should give markets the opportunity to clear. That’s no guarantee of widespread prosperity, but it’s an important precursor.