Moderate Growth for Q3, About as Expected. Q4 Looks Good Too.
- Real Gross Domestic Product for 2017Q3 increased at a moderate 3.0 percent annualized rate.
- Consumer Spending increased at a 2.4 percent rate, supported by hurricane-related auto sales.
Despite and because of the active 2017 hurricane season, U.S. real GDP growth for the third quarter registered a moderately strong 3.0 percent, according to the advance estimate. Real consumer spending, the lion’s share of GDP, was good, increasing at a moderate 2.4 percent annual rate. Real consumer spending on durable goods, including automobiles, increased at a strong 8.3 percent annualized rate. This is where we see an economic positive coming from the storms as residents of South Texas and Florida replaced their flooded and ruined cars. We expect this category to normalize in the current fourth quarter, and also in the first quarter of 2018. Business fixed investment was a bit soft, expanding at a 3.9 percent rate. Here is where we see some negative impact from the storms, a slowing down of projects. Also, stabilizing oil prices near $50 per barrel have contributed to a flattening of the drilling rig count and that showed up in a 5.2 percent rate of decline in business investment for structures. Inventories were a positive in Q3. Real inventories increased by $30.3 billion ($2009), which added 0.73 percentage points to the headline growth rate. International trade was also a net positive contributor to Q3 GDP, adding 0.41 percentage points to the headline rate. Real exports expanded at a 2.3 percent annualized rate, boosted by exports of services. Imports dipped at a 0.8 percent annual rate. The trade numbers get updated in the second and third estimates of quarterly GDP and this can cause revisions to total GDP. Real government spending eased at a 0.1 percent annualized rate in Q3, weighing slightly on total GDP. Federal nondefense spending and state/local government spending were both down in Q3. The price index for GDP increased at a 2.2 percent annual rate in Q3. All in, this morning’s GDP data are positive and consistent with ongoing moderate GDP growth in the current fourth quarter. In our October U.S. Economic Outlook, which does not include today’s data on Q3, we have real GDP growth easing slightly to 2.5 percent in Q4. We will be updating our U.S. GDP forecast with the new Q3 data around November 7.
Market Reaction: U.S. equity markets open with gains. The 10-year Treasury bond yield is down to 2.42 percent. NYMEX crude oil is up to $53.46/barrel. Natural gas futures are down to $2.97/mmbtu.
For a PDF version of this report click here: GDP_10272017.pdf
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