US 3Q GDP QoQ annualized 3.5% vs 3.3% estimate

Author: Greg Michalowski | Category: News

Personal consumption of 4.0% versus 3.3% expected

The numbers:
  • GDP 3.5% vs 3.3% expected
  • Personal Consumption 4.0% vs 3.3% expected.  Best since 2014. It contributed 2.69% to GDP
  • GDP Price index 1.7% vs 2,1% exoecte
  • Core PCE QoQ 1.6% versus 1.8% expected
  • GDP deflator 1.4% versus 2.1% expected
  • gross private investment, +12% versus -0.5% last quarter.  Contributed 2.03% to GDP
  • exports -3.5% versus +9.3% last quarter
  • imports +9.1% versus -0.6% last quarter
  • net exports subtracted -1.78% from GDP
  • government consumption 3.3% versus 2.5% last. Contributed 0.56% to GDP
  • inventories added 2.07% to GDP versus -1.17% last quarter
  • final sales to private domestic purchases rose 3.1% after rising 4.3% in the prior quarter
  • nonresidential fixed investment or spending on equipment, structures and intellectual property rose 0.8% in the 3rd quarter after rising 8.7% in the prior quarter.  We kissed and almost 2 years
  • inventories provided the biggest contribution since early 2015
  • The drag from trade was the largest in 33 years
  • government spending rose the most since 2016
The GDP was slightly better than the concensus with consumption (70% of GDP) and inventory buildup leading the gains:

Net contributions to the 3.5% GDP
  • GDP 3.5%
  • Consumption +2.69%
  • Investment, +2.03%
  • Net exports, -1.78%
  • Government, +0.56%
Inventories, which is part of investment component, added 2.07% of the 2.03% gain.   The worry is the investment boom is not business investment, but inventories instead.  If the investment is not showing up the productivity gains needed for sustainable growth is in question.  

On the positive side, the tax cuts are leading to consumption (jobs growth is helping that as well of course). 

The head scratcher is the sluggish business investment, and inflation numbers which were all below expectations. 

The Dow is off lows and is down -243 points.
The Nasdaq is down -219 points
The S&P is down -40 points 
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