Taken together, last week’s set of economic reports sent markets participants scrambling to raise their Q4 GDP estimates from around 3% to closer to 4%. Our own forecast for Q4 (3 to 3.5%) is too low as well. Better than expected data on export growth in October, inventory restocking in October, retail sales in November, and data released in early December suggesting a downward revision to Q3 GDP growth were the key drivers behind the renewed optimism for Q4. Even the news on the nation’s budget deficit in November was better than expected, although the deficit remains politically uncomfortably high. In addition, the four-week average on jobless claims continued to decline in early December, further raising the odds that the economy will begin to create jobs in early 2010.

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