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Goldman On GDP: Stronger Number Driven By Ongoing Inventory Investment, Real Final Sales Weak
From Goldman Sachs:
GDP Growth Firmer Due to Inventory Investment; State and Local Pressures Slow Employment Costs
BOTTOM LINE: Q3 growth in line with consensus expectations-but slightly higher than ours due to faster-than-expected inventory accumulation. Growth in real final sales was a touch weaker than expected, due mainly to another large trade drag. Consumption growth was healthy, though slower than we thought, while federal government outlays and business fixed investment (mainly construction) were higher. Meanwhile, moderation in employment costs reflects budget pressures of state and local sector.
KEY NUMBERS:
- Real GDP +2.0% in Q3 (qoq, annualized, +3.1% yoy) vs. GS +1.5%, median forecast +2.0%.
- GDP price index +2.3% in Q3 (qoq, annualized, +1.2% yoy) vs. GS and median forecast +1.8%.
- Core PCE price index +0.8% in Q3 (qoq, annualized, +1.3% yoy) vs. GS +1.2%, median forecast +1.0%.
- Employment cost index +0.4% in Q3 (qoq, +1.9% yoy) vs. GS +0.4%, median forecast +0.5%.
MAIN POINTS:
1. The economy grew at a 2% annual rate according to the preliminary official estimate. This was right in line with the median expectation and somewhat higher than our 1.5% figure. However, most of the upside surprise was due to inventory accumulation-inventories rose by $115.5bn, contributing 1.4 percentage point to the headline figure. Meanwhile, real final sales only grew only 0.6%, a touch less than we thought and underlining the softness of this recovery.
2. Within final sales, private consumption grew at a healthy 2.6%-broadly shared across goods and services spending. Federal government spending (up 8.8%) and business fixed investment (up 0.8%) were firmer than we had expected. The latter was mainly due to stronger construction spending. The trade balance, however, again disappointed-as imports continued to surge but growth in exports slowed-subtracting 2 percentage points from Q3 growth.
3. Price indexes surprised on both sides. The GDP price index rose a stiffer-than-expected 2.3% while the core index of prices for personal consumption rose only 0.8%. The reasons for these larger-than-normal surprises are not immediately clear, though deflation of oil imports is probably at the root of the higher-than-expected GDP price index.
4. The employment cost index moderated further in the third quarter as total compensation in the government (state and local) sector flattened. This flattening reflects an unprecedented 0.3% decline in wages and salaries (the only other setback in the 29-year history of the series was a 0.1% drop in the third quarter of 2009) coupled with a 0.7% increase in benefits (that's essentially in line with the past couple of years but slower than was the case prior to the recession). Compensation trends in private industry were essentially unchanged from the second quarter: +0.4% on wages, +0.5% on benefits.
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and the 'inventory investment' is purchased with inflationary forces? credit? stealth QE?
... hot air?
The after Christmas sales and bankruptcy liquidations should have some awesome bargains.
So................remind me again why we need QE 2.0?
Sorry, but I'm a little confused. My programming must be slipping a bit. What were those talking points I'm supposed to stick to as I celebrate some growth, but also complain about the growth?
BTW has anyone noticed that on the CNBC "heat map" the green squares are ALWAYS at the top, even if there's only one? Must be part of that subliminal programming where green is good and red is bad. :>)
Squid Christmas Bonuses!
(why do I have to keep reminding y'all what is important)
:)
and as far as the colormapping I certainly am programmed to coorelate red with the fires of hades.
if an enemy seeks to know what you are thinking..
baffle him.
CNBC is just like the dude hoping to execute a Bar on Close order.
Hopeful, dumb and praying that the heat map, is impressive enough to generate interest.
roughly translated:
Just give us the fu**ing money.
Chart: EURUSD
Risk off?
http://99ercharts.blogspot.com/2010/10/eurusd_29.html
http://www.zerohedge.com/forum/99er-charts
Exactly, and whether you're in equities or commodities, this is the key number. Regardless of whether it makes sense, and in spite of attempts by several players to supress, the USD is primed for a pretty big leg up.
an unprecedented 0.3% decline in wages and salaries
GDP price index rose a stiffer-than-expected 2.3%
Oh Mama, can this really be the end?
To be stuck inside recovery
With biflation blues again
Well done lol
No, GDP driven by money printing, otherwise it would be a negative number now.
Nouriel Final sales collapsed in Q3 growing at pathetic 0.6%. Almost all of 2% headline driven by an uninteded spike of inventories of unsold goods
Funny how the chain is in 2005 dollars, yet the chain deflator was still 2.3%. Or how the numbers are annualized and seasonally-adjusted, meaning that a rough go of things in 4Q retail could cliff-dive the GDP.
A big part of inventory build was imports. Not good. That's why real final sales were anemic and the trade gap was wider. Bodes poorly going forward since inventories have risen for the 3rd straight quarter with a faster pace. But the big picture together with unemployment tells a story of continued outsourcing and import-dependancy.
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