SCOREBOARD: Growth deja vu

Growth data, by and large, was very positive overnight and when you consider that this is data for the third quarter and for October, and then think about the negative news flow at the time and the pessimistic debate that was going on, it's quite apparent there is something very wrong with general analytics in the market. All of it was for nought, you see; a complete waste of time and emotion.

Far from slipping into a double dip and in spite of the widespread expectation for a deceleration, global growth looks to have accelerated in the third quarter and judging from US retail spending so far, the fourth quarter is looking pretty good as well. Yes, yes, I know all of this data is accompanied by news stories suggesting it won't last, it's backward looking and we've just seen a whole batch of growth downgrades. But then these are the same qualitative judgements that have been attached to data for nearly two years now. They've repeatedly come to nothing and so I think it is safe to dismiss them (note that reasons why it won't continue are never offered, just stated as a fact). I mean you could equally add to each headline – 'retail spending stronger than expected again, and set to boom in 2012' – there is certainly more evidence for a boom rather than another recession, yet for some reason people continually choose to state that it won't last even though they've been wrong for two years now.

So, US retail sales were much stronger than expected, rising by 0.5 per cent in October (market looking for 0.3 per cent) or 0.7 per cent on a core basis (ex auto gas and building). Great news obviously, which follows solid gains over the last few months as well. Annually, sales are 7.2 per cent higher, which is much stronger than the historical average of 4.6 per cent.

For business, shipments rose a solid 0.6 per cent in September after a 0.4 per cent gain in the month prior, suggesting ongoing strong demand on this front. Annually, shipments are 11.6 per cent higher. Fear or uncertainty is weighing however, and inventories were slightly negative in the months despite strong sales.

In Europe, German GDP rose by 0.5 per cent in the third quarter, which was broadly in line with expectations, to be 2.5 per cent higher annually. French GDP rose by 0.4 per cent, while for the eurozone as a whole, GDP was 0.2 per cent higher – again matching expectations. Now when you consider that growth over the last decade has averaged 0.3 per cent per quarter, this isn't a bad outcome. Overall, growth is slightly below average, which given everything that has been going on is remarkable.

So far, so good then – growth is doing well. Now, despite my dismissal of constant double dip drivel and the associated doom merchantry, the world is very clearly not without risks. As regular readers will know, I think we are at the crossroads given the situation in Europe but a path has yet to be chosen. The point of highlighting all of the above wasn't to dismiss these very real risks, but rather to highlight the danger in blindly following headlines and the alarmists in telling us how bad things are. They were not as bad as everyone was telling you in August/September. Risks are skewed to the downside at the moment, sure. But as I've been arguing, it is Europe (well European politicians to be precise) that stands as the main threat, not a lack of private demand or stalling growth etc.

News on the European front isn't good unfortunately, and Italian bond yields shot up again last night – 37bps on the 10-year and almost 50bps on the 2-year. Spanish yields also shot about 20-30bps higher and markets are even putting pressure on French yields (10-year up 25bps to 3.67 per cent). No end in sight yet, no news and no sign that anything is or really can be done in the near-term.

Seeing those moves, equity punters sold European stocks, with the Dax off 0.9 per cent, the Cac down 1.9 per cent and the FTSE basically flat (-0.03 per cent). The euro was also offered and, as I write, is down about 70 pips to 1.3545. Sterling was off 57 pips, but the Australian dollar did little – currently at 1.0192, which is little changed from yesterday afternoon.

Price action on Wall Street initially looked like it was going to take its lead from Europe and, at the low, the S&P was down 0.6 per cent. From there a bid developed, however, and the index closed 0.5 per cent higher (1,258). Tech stocks (Nasdaq up 1.1 per cent to 2,686) and financials seemed to be the main drivers, but I'm not 100 per cent sure exactly why. Indeed most sectors had a modest bid except energy stocks, although crude prices were higher overnight – WTI up 1.3 per cent to $99.5 and Brent up 0.5 per cent to $112.4. Elsewhere, the Dow ended 17 points higher to 12,096 and Australia's SPI was 0.23 per cent higher at 4,320.

Following crude, other commodities found a modest bid as well – gold was up about $12 to $1,782, silver rose 1.4 per cent and copper was 0.3 per cent higher. Otherwise, on the debt side, moves were small. On a 2-8bps range the US 2-year yield was 1bp higher to 0.24 per cent, the 5-year rose almost 3bps to 0.91 per cent and the 10-year was 2bps higher at 2.06 per cent. Australian futures were off a tick or two to 96.57 on the 3s and 95.85 on the 10s.

Bits and prices otherwise. In the UK, CPI was weaker than expected, rising 0.1 per cent in October to be 5 per cent higher annually. Core inflation edged higher to 3.5 per cent year-on-year from 3.4 per cent. In the US, producer prices were flat in October and are up 5.9 per cent annually, although core inflation pushed higher to 2.8 per cent year-on-year (from 2.5 per cent). The Empire Manufacturing Index then rose to 0.6 (highest since May) from -8.4 (average is 9). Finally, the German ZEW survey showed sentiment fell to -55.2 from -48.3.

In Australia today we get the third quarter labour price index which gives a measure of wage inflation. The market looks for a rise of 0.9 per cent with me a little lower at 0.8 per cent. Tonight, watch out for US CPI and industrial production, eurozone CPI and the BoE's inflation report.

Adam Carr is senior economist at ICAP Australia. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

Follow @AdamCarrEcon on Twitter.