• INDICATOR: Revised Third Quarter GDP, November Consumer Confidence and September Home Prices
• KEY DATA: GDP: +3.2% (from 2.9%); Consumption: 2.8% (from 2.1%)/ Confidence: up 6.3 points/ Home Prices (Over Year): +5.5%
• IN A NUTSHELL: “The economy is starting to hit on almost all cylinders.”

WHAT IT MEANS: Guess what? The economy isn’t terrible, at least if you believe the government’s data. Now I know some people pick and choose what they like or don’t like about the data, but economists are stuck actually having to look at all the numbers and right now they look pretty good. The economy expanded even faster in the summer than initially thought, though not quite as fast as my forecast. One more revision and we should be at the 3.4% that I had. The key to the upward revision was much better consumer spending than first estimated. Offsetting that was a smaller inventory build and less capital spending. That actually is good since the lower levels create a better chance the final quarter will also be above 3%. We also got the first reading on third quarter corporate profits and they soared. Firms have the funds to spend but they are not doing that. That could change soon..

Can consumers keep spending as they have been? Signs point to that happening. First, it looks like the Black Friday weekend and Cyber Monday were really strong. I know I tapped out the past few days. But more importantly, consumers seem more optimistic. The Conference Board’s Consumer Confidence Index rebounded in November after falling in October. Respondents had a better attitude toward both current and present economic conditions and thought that jobs would be more available. Rising confidence holds out hope the holiday shopping season will be strong.

On the housing front, prices continue to rise. The S&P CoreLogic Case-Shiller National Home Price Index increased solidly in September, hitting its highest level ever. Yes, it broke through the peak set in July 2006. Every one of the twenty large metro areas posted a gain over the month, showing the increases are widespread.

MARKETS AND FED POLICY IMPLICATIONS: The wheels are starting to come off the bad economy. Did I say that wrong? Not really. It seems that everyone is stuck in 2009 when it comes to describing the economy. Consumers are not spending – wrong. The housing market is bad – wrong. Corporate profits are terrible – wrong. Businesses are hunkering down and not spending – right! So, what do CEOs know that everyone else doesn’t? You tell me and we both know. There is only so much consumers can do on their own and exporters have probably maxed out given the uncertain world economy and strong dollar, so it is either up to businesses or the government. With Republicans having converted magically from no more spending to forget the deficit, Keynes is my hero, corporations are the only group left holding things back. Why haven’t companies stepped up? In a 2% economic growth world, which we are in, stock prices can do better if profits are plowed into buy backs and mergers rather than investing in plant and equipment. And just think, if those hundreds of billions of dollars held overseas are repatriated, boy will the M&A business go crazy, even if that adds little to potential GDP. If companies take some of their profits and actually start adding to capital, growth could really accelerate.

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.