GDP raised from 1.6% to 2.2%

The Q3 GDP was revised up STRONGLY to 2.2%. Sure enough, yesterday Bernanke said all was fine 'except for housing and autos.' He had an early peek.

Bernanke is referencing the split economy that I have been pondering. About 20% of our GDP is tied to autos and housing (if you include gas and furniture). It s 30% of our disposable income. Do you think it is safe to ignore such a massive chunk of our economy? Indeed, if we strip out food and government spending, autos and housing is nearly 50% of the production.

And that 50% is dropping fast (housing prices fell 3.5% last month).

The GDP was raised 0.6%, and it breakdowns as follows:

Personal consumption +0.45%

* Durable goods up 0.15% (0.08% auto related)

* Services up 0.3% (0.1% household operations like electricity, 0.05% housing, 0.08% medical care)

Private Investment flat

* IT Spending up 0.16% but residential spending down (0.3%).

Government consumption up 0.1%

TRANSLATION:
1. Inflation is worse than appears: electricity, housing and medical care costs drove almost half of the GDP revision
2. White collar jobs look solid and blue collar jobs are at risk
3. Gas consumption will remain super strong for some time
4. Stock market will like the GDP strength but not

From the macro viewpoint, it means:
1. Confirms the economy is slowing gently. The soft landing looks to be holding. And GDP growth of ~2% is still good.
2. No interest rate cuts soon. With a solid GDP performance and remaining inflation concerns, no cuts anytime soon. The stock market has been betting on interest rate cuts, and so has the bond market. Not likely.
3. Falling housing spending has not yet fully hit the GDP numbers