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Q3 GDP Comes On Top Of Expectations, Prints At 2.0%
Total Q3 GDP of $13,260.7 billion, an increase of $65 billion, of which $23.7 billion are personal current transfer receipts. The underlying data is not good, as the meet was driven by inventories, which increased by $115.5 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first. This is a forward growth "draw" because as Goldman noted a higher than expected inventory number "becomes a negative risk factor for Q4 or Q1." Other indicators: US GDP Price Index (Q3 A) 2.3% vs. Exp. 1.8% (Prev. 1.9%); Home building fell 29% by 2 points, investors add 1.44 points; US Q3 consumer spending rises 2.6%, most since Q4 2006; US Personal Consumption (Q3 A) Q/Q 2.6% vs. Exp. 2.5% (Prev. 2.2%), highest since Q4 2006; Core PCE (Q3 A) Q/Q 0.8% vs. Exp. 1.0% (Prev. 1.0%); Employment Cost Index (Q3 A) Q/Q 0.4% vs. Exp. 0.5% (Prev. 0.5%)
From the report:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.
The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The "second" estimate for the third quarter, based on more complete data, will be released on November 23, 2010.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, federal government spending, and exports that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The small acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in imports and accelerations in private inventory investment and in PCE that were partly offset by a downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.
More granular read:
Real personal consumption expenditures increased 2.6 percent in the third quarter, compared with an increase of 2.2 percent in the second. Durable goods increased 6.1 percent, compared with an increase of 6.8 percent. Nondurable goods increased 1.3 percent, compared with an increase of 1.9 percent. Services increased 2.5 percent, compared with an increase of 1.6 percent.
Real nonresidential fixed investment increased 9.7 percent in the third quarter, compared with an increase of 17.2 percent in the second. Nonresidential structures increased 3.9 percent, in contrast to a decrease of 0.5 percent. Equipment and software increased 12.0 percent, compared with an increase of 24.8 percent. Real residential fixed investment decreased 29.1 percent, in contrast to an increase of 25.7 percent.
Real exports of goods and services increased 5.0 percent in the third quarter, compared with an increase of 9.1 percent in the second. Real imports of goods and services increased 17.4 percent, compared with an increase of 33.5 percent.
Real federal government consumption expenditures and gross investment increased 8.8 percent in the third quarter, compared with an increase of 9.1 percent in the second. National defense increased 8.5 percent, compared with an increase of 7.4 percent. Nondefense increased 9.6 percent, compared with an increase of 12.8 percent. Real state and local government consumption expenditures and gross investment decreased 0.2 percent, in contrast to an increase of 0.6 percent.
The change in real private inventories added 1.44 percentage points to the third-quarter change in real GDP after adding 0.82 percentage point to the second-quarter change. Private businesses increased inventories $115.5 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first.
Real final sales of domestic product -- GDP less change in private inventories -- increased 0.6 percent in the third quarter, compared with an increase of 0.9 percent in the second.
In a nutshell:
- PCE - Goods: 0.64%
- PCE - Services: 1.15%
- Fixed investment: 0.10%
- Change in inventories: 1.44%
- Net exports" -2.01%
- Government consumption: 0.68%
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Good for it. Revised lower @ future date?
thats the m.o. nowadays
Not sure if a massive deluge of stealth QE and crooked bank earnings are an accurate indicator of the economy..
should be called GDB...for Gross Domestic Bullshit.
+++++
My friend Doug Kass writes:
On Dr. Nouriel Roubini (Part Deux)
I don't expect the media to confront him on his next appearance, but he was plain wrong.10/29/2010 9:46 AM EDT
Let me start out by saying that I have met Dr. Roubini and he seems like a good guy and is certainly a respected professor.
Nevertheless, he appears, as Grandma Koufax would say, "often wrong but never in doubt."
I have also written that Nouriel does not have a concession on being wrong; we are all often wrong, especially in a business where Mr. Market humbles us so frequently.
On The Edge, I try to recognize and admit when I am wrong.
In my Q&A with him over the summer, I challenged some of his ursine views and expectations.
Previous to that, I have written plenty about the media's preoccupation with Dr. Roubini, not all of it complimentary. In many ways, the spotlight on him, even when he is a wrong-way Corrigan, is more the media's fault than his. It seems that in every cycle, the media needs a standard bearer of the bear case, and Nouriel has been that over the past five years.
That said, Nouriel made the following observation on Aug. 25, 2010:
I don't expect the media to confront him on his next appearance, but he was plain wrong.
Stated simply.
Of course, this morning's 2% print was the advance reading, and Dr. Doom has a series of revisions to be proven correct, but I doubt that will be the case. A third-quarter reading well under 1% just seems absurd.
Of course, this post probably precludes me from being invited to one of his fabulous parties.
+1
China is on to us..
uh oh.
http://globaleconomicanalysis.blogspot.com/2010/10/misguided-love-affair-with-china-chinas.html
""Because the United States' issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen (Chinese commerce minister) was quoted as saying by the official Xinhua news agency.
problem is, they are doing it x4 and the whole house of cards is built on fiat created currencies; and the REAL production/equity is just not there to support it.
so we have fake production, fake equity, Gross Domestic Bullshit numbers all based on hot air fake money. all built so they can sell it out from under the long term investor.
Much lower. I'll bid for 1.4% on the final.
Nouriel Roubini just simply wrong (once again !!!)
[if you cannot trade, then teach... if you cannot teach, then teach gym]
http://www.businessinsider.com/roubini-q3-gdp-2010-8
Post scriptum: why did I not get a tweet on today's numbers...?
CHain weighted CPI looks a bit higher than expected.
You know who this market is? Even Steven.
You beat me. That's the real question. After adjustments is it revised down to .6 or so?
letdown, either way.
Subject to revision == highest utility as toilet tissue.
I suspect it will only be revised down to 1.5-1.7 range....though it looks like government spending increased so perhaps not.
Well, let's see. The 2nd Quarter revision was about 33% off. So if these numbers are as skewed as the last set, that would put it around 1.2%. Double-dip here we come.
Oh, and Tyler: you beat out all of the MSM sites in reporting these numbers. I just did a quick look before coming here. :)
Looks like the 'stick save' was done by inventory shuffle and govt spending.
I think in reality you are probably correct, but govt padded numbers probably won't be that low...unless someone decides to be honest...but you may be right. That would be a huge revision down.
Inventory build skewed this number quite a bit, because final sales were actually down. Government spending continues to prop this up. It's criminal that a government running trillion dollar deficits can prop their own GDP numbers up by printing and spending more money. I know we cannot print and borrow our way to prosperity, but we are sure giving it a damn good try.
It kind of reminds me of someone who is living on their credit cards counting the amount they increased their debt each year as "annual income".
exactly,
add in the dollar "production" of the financial sector,
use the accounting gimmick of ignoring societal "inventory loss" from resource/environment depletion and destruction
discount unpaid child care or schooling, but count more prisons as GDP positive
and consider the political bias of "GDP"
As Rep. Pete Stark (D,CA) says "the bigger the national debt, the wealthier we are".
http://www.youtube.com/watch?v=UjbPZAMked0
So given that we can borrow, print and spend our "reserve" currency buying anything and everything from anyone, we are still the richest, most prosperous nation in the world. I guess in order to understand our government, we have to start thinking like they do.
Merry Christmas!
Now get your credit cards out, get to the mall and buy some Chinese made crap for your kids. Only 57 shopping days left.
Too bad for the bulls, if Q3 GDP were already in the 1.5-1.7% range, we would easily be looking at over $1t in QE 2.0. With 2% as print, I think we get 600billion over the next 6 months (the Bullard route of 100b/month)--with option to extend "as needed." "Sell-off now or next week?" that is the question.
Anyone see a revision on Q2? I saw something flashed on CNBC that looked like Q2 had been revised negative, but cannot find confirmation. Bloomberg shows nothing.
If anybody is watching CNBC on DVR, would love to have another look at that flashed headline. I thought it said Q3 Adv GPD +2% vs. Q2 revised -1.2%
I'm looking for that, too.
The reaction in the $ and gold would almost certainly mean that Q2 was revised.
CNBC posted -1.7% for Q2. Assuming I remember that flash correctly, that doesn't inspire confidence.
Must have been a CNBC mistake since Q2 was originally +1.7%. Unlikely it would be revised negative to precisely the same value.
Thank you for the correction. Makes more sense now. :-)
That is bearish for the markets. We need a QE 2.0 of a quintillion!!
MarketWatch says..
How is that possible? Its booming 2006 again with 20% unemployment?
No mortgage payment for 12 months= Party like its 06'
Because the initial number reported is always off, and will be revised downward later. It will take 5 months to get closer to the real number.
Proof that Obama policies are working ..... must save demorat majority....must save... must...
LIES and FUCKING LIES.... both are destructive but being raped after the lie is just piling on. Someone throw the flag. That's just gay.
...and with the CPI understated by at least 2 percentage points, this means another negative real GDP print. Expect the presses to run pointlessly for a long time, dumping fictional bills into the giant liquidity trap (see japanese economic history for details) we're all in.
Eggggselllent point, Mr. Burns. +++
The final revision will be about 1% and Q4 will go negative ( the final number at least).
A picture is worth 1K words, but here are a couple for the BEA "You LIE!"
http://www.consumerindexes.com/commentary_2010_dailygrowthindexvsgdp_ful...
--- Governor, Bank of Canada, Oct. 27
I guess we don't need QE II then, right?
Nobody listens to the Bank of Canada
A large portion of inventory build came from imports (and explains weakening real final sales). That's net bearish for the 2 key reasons that 1) the trade deficit has been widening with all that still implies for the structure of the US economy and 2) inventories are building sequentially and are starting to flash yellow for a potential inventory cycle dip.
Elsewhere GDP price index rose sharply while employment cost index dropped. Biflation Blues.......again.
US economy simply bouncing a long the bottom of the river.
I disagree. I see a continued slide as the trends set in motion during the crash continue almost unabated.
Looks like 'risk on' by the AUDJPY now. Prepare for an up day EOD
Here is an interesting stat...
GDP mean average has been ~1.7% over the last 10 yrs. If you expand out to 20 yrs the mean average is ~2.54%. So even though the population increase has been a linear increase (10% per decade), the GDP mean average has actually been an decline.
It's kinda funny, you know, the new "growth" we are having. Everybody except a select few categories of ultra-rich, Washington, and Wall St are feeling much, much poorer and more strapped every day.....
......I wonder if they are lying to us?
Does this report really surprise anyone here? I mean, do you really think that it wasn't going to beat? This is a big, same as it ever was...YAWN...
Admittedly, a really FRUSTRATING YAWN, but a yawn nonetheless.
Suddenly theres no real need for the diamond encrusted Q/E package numbers that were being thrown about for the last few months? The Q/E has already been front loaded into the markets, now everyones wondering when it will be delivered. Some $500 billion numbers will send the robots into a tantrum. 2.0 GDP wow thank God for Bernankes GDP press.
Latest QE2 expectations are coming in at six trillion below infinity.
Nouriel Roubini just simply wrong (once again !!!)
[if you cannot trade, then teach... if you cannot teach, then teach gym]
http://www.businessinsider.com/roubini-q3-gdp-2010-8
Post scriptum: why did I not get a tweet on today's numbers...?
2.0% To Be Revised Downward 3 Times AFTER the Election...
I will wait for the official GDP via John Williams Shadow Stats thank you very much...
US Personal Consumption (Q3 A) Q/Q 2.6% vs. Exp. 2.5% (Prev. 2.2%)
If inflation is understated (see Williams Alt CPI)
=> Personal Consumption is over stated
=> +2.6% is over stated
Thus this portion of GDP is over stated... QED.
(See Williams Axiom: Understated CPI over states GDP...)
We know food prices are sky rocketing... Oh wait we exclude food from CPI because it has to be seasonally adjusted for volatility. Food isn't a cost of living anyway...
I'll wait for John...
Crawling out of the trench I've been fighting in the past couple of weeks, treat you guys to nopat's take on the data. YMMV: remember guys, if it was actually worth anything, I'd charge for it. If we're lucky, lizzy36's paying attention and will pop her head in. Maybe even tell me I'm right!
I'm simply looking at two key components: private non-residential fixed investments and personal consumption. Of the increase in private non-residential fixed investment, almost all of which is coming from:
In terms of personal consumption, 75% of the seasonally adjusted increase can be seen from 3 main areas:
Combined with an inventory push, I'm still flat to negative overall. We're not at a point where organic demand can allow fiscal/monetary stimulus to abate (if anything POMO and QE2 should tell you erosion has accelerated; I'd argue we're seeing a bullwhip effect WRT prior gov't spending since, in theory, 90- to 180-day terms mean those checks for Q1/Q2 purchases should be hitting business accounts now). Additionally, the drop in personal savings (-$41B, following Q2's spike of +$60B) hasn't exactly translated into tangible economic growth and will probably see a revision since, at first glance, this is probably a trended number baking in a lot of historical seasonality; that, or the retail channels really blew out their backstock - either way it's a shit sandwich, it just depends on which end you're biting from. From where I sit, Q4's not going to look any better.
We have an annual deficit of $1.5T (12%'ish of GDP) in transfer payments via Treasury borrowing, etc. yielding a 2% growth in GDP ($280B). That's an ROI only the government could love.
Ahh, and the payments on each additional Trillion (now $14T of them) will be from $35 to $100 billion a year ad infinitum (unless we continue to buy all our debt ourselves (and destroy the dollar) and we only buy on the shortest of maturities which are the cheapest but most vulnerable to an interest uptick).
Our "growth" is far offset by the debt we are taking on to produce the "growth". Just servicing the growing national deficit will soon (2015?) suck up 50% of all tax receipts (currently $2T'ish annually). We are in the death spiral of needing to borrow greater and greater money just to pay our deficits. Only way this borrowing would make sense was if it resulted in GDP gains (and resultant tax receipts) outstipping the investment.
$280B growth in GDP = $42B in increased tax revenue (assuming 15% as per the rest of tax on GDP) to service $50 to $150B in increased interest payments from the new debt incurred.
And really, we need a much higher GDP to be able to make up the unfunded's as well. And really, really, we need a much higher GDP to be able to raise interest rates back to "normal" so the Fed has a policy tool to fight the next recession, and we need much higher GDP to allow for higher employment, wage increases, tax revenue increases w/out tax rate hikes, and lastly an "exit strategy".
And this doesn't address the need to fund the $100T of unfunded liabilities, pensions, blah blah (either by reducing payments and ratcheting down future spending due to the lower benefits or increasing taxes to pay for said bene's -but no matter what you do, they all result in lower GDP).
FOOOOOKed we are and how does the market react to the slow death of America, with thunderous applause and a push for new highs. Enjoy the death spiral!!! WEEEEEEEE!!!
This strong GDP number explains the tepid POMO yesterday.
Certainly lends more weight to the $ 100 Billion per month QE-2 Lite option.
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