U.S. Outlook: Ignore the headline – Q3 GDP report was solid

Scott Anderson
Posted by Scott Anderson
Chief Economist

Real GDP growth for the third quarter (1.5%) was a big deterioration from the second quarter’s 3.9% growth, but in this instance the headline was deceiving.

Graph showing recent patterns in consumer spending (monthly)The primary — and virtually only — driver of the drop was a steep inventory correction that sliced a whopping 1.4 percentage points off the third quarter GDP estimate.

For more on this and other economic developments this week, see my full report. Highlights are outlined below, followed by a link to the full U.S. Outlook report, delivered on Oct 30.

Key observations:
  • The drop in inventory gains in Q3 is just an adjustment to the mean and is not likely to be repeated in the quarters ahead.
  • Real consumer spending held above 3% for the second quarter in a row, and we anticipate a similar performance in Q4.
  • Despite all the hand wringing about the strong U.S. dollar, the trade balance only deteriorated by $1.6 billion last quarter.
  • Our current forecast for Q4 real GDP growth is 2.5%.
Click here to read my full report.

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