The first look at US Q3 GDP:

  • Best US quarter on record (following the worst quarter)
  • Q2 was -31.4%
  • Ex motor vehicles +26.3% vs -29.0%
  • Personal consumption +40.7% vs +38.9% expected
  • GDP price index +3.6% vs +2.9% expected
  • Core PCE q/q +3.5% vs +4.0% expected
  • Inventories added 6.62 pp to GDP
  • Business investment +20.3% vs -27.2% prior
  • Business investment in equipment +70.1% vs -35.9% prior
  • Exports +59.7% vs -64.4% prior
  • Imports +91.1% vs -54.1% prior
  • Inventories added 6.62 pp to GDP
  • Home investment +59.3% vs -35.6% prior
  • Business investment in structures -14.6% vs -33.6% prior
  • GDP y/y -2.9%

These are all breathtaking numbers but were largely expected. The consumption number stands out as a pleasant surprise but the business investment number is marginally negative, especially since those high investments in equipment were partly due to one-off covid changes (like installing dividers).

For some perspective on where we stand; this rebound erases about two-thirds of the total decline and it will probably take into 2022 to erase it all, especially since this quarter is looking increasingly dim. Four-quarter GDP is down 2.9%, which is much better than we thought it would be five months ago but compares to -3.9% at the depths of the great recession. Since the end of 2019, it's down 3.5%.

In q/q terms, GDP rose 7.4% after falling by 9.0% in Q2 and 1.3% in Q1.

Market reaction to this report has been minimal, with all the focus on Q4, the election and the virus.