The latest macro data this week confirm the sharp US economic slowdown that I have been predicting and they point to a 0% GDP growth in Q4:

- New homes sales fell sharply and the excess supply of new homes is increasing; existing homes sales stabilized for the first time in 8 months (but such homes sales do not include the massive increase in cancellations). At the same time housing starts and building permits literally collapsed last month.

- Non residential construction is now stalling too 

- Mortgage applications fell sharply again for the last week 

- Durable goods orders literally collapsed suggesting that corporate investment is sharply falling in Q4

- The Chicago manufacturing index, a leading indicator of the economy, is sharply down and below the critical 50 level.

- Consumer confidence has sharply fallen in spite of lower gasoline prices.

- Wal-Mart and most retailers announced mediocre November and Thanksgiving sales

- Initial claims for unemployment benefits are sharply up, a major leading indicator of  the job market

- Consumer spending is now growing much less than incomes as households are retrenching

- The revision to the Q3 growth figures was not all good news: half of it was due to an increase in inventories of unsold goods (that will thus sharply weaken Q4 growth as inventory adjustment via production cuts is occurring)

- The US dollar is falling as the economic slowdown, the expectation of a Fed rate cut and an unsustainable US current account deficit as now taking a toll on the dollar.

- The US yield curve is more inverted than ever and even the Fed model of the yield curve is now pricing a 52% probability of a recession in 2007 

- Even the US stock market sucker rally is now being shaken this week and today by the onslaught of bad economic news 

So, while some of the revisions for Q3 were on the upside, all the main macro news about Q4 and about October and November are real bad. So, I find validation in all these data to my forecast that Q4 growth will be 0%.

Friday Update: As i predicted over a month ago the manufacturing ISM fell below the critical contractionary value of 50. Also I have been predicting for months now that construction spending would keep on falling not just in the housing sector but, more importantly, in non-residential construction. The data today on free falling construction spending (residential and non-residential) and on auto slumping sales fully confirm my views that I have been repeating for a while: the housing recession is becoming a construction recession, an auto recession and a manufacturing recession and an investment recession and, soon enough, a retail and consumption recession.  Expect a full fledged recession by Q2 of 2007. The economy has followed perfectly the path to a recession in 2007 that I started to predict in July and August of this year.

PS: It is totally fine to disagree with my bearish economic outlook; but I would appreciate if commentators of this blog would stop rude personal insults and childish and vulgar comments that have zero substance and zero content and zero analysis. If you disagree - and intelligent people can respectfully disagree with me as much as they want - provide data, facts, analysis, discussion, articulate commentary and intelligent ideas, not stupid and infantile personal insults that are really pretty pathetic and idiotic. I have not censored any of these vulgar comments - 99% of which are cowardly anonymous - to expose the intellectual shallowness of those whose comparative advantage is not intelligent economic analysis but generating insults. And thanks to the many - both those who agree and who strongly disagree with me - who do provide intelligent commentary and analysis on this blog. I appreciate very much critique and discussion; I do not appreciate vulgar and childish personal attacks.