Q3 GDP Soars To 3.6% On Massive Inventory Accumulation; Consumption Contribution Lowest Since 2009
On the surface, the first revision to the Q3 GDP print, which initially came at 2.8%, was tremendous: at 3.6% well above the 3.1% expected, nothing could be better. Unfortunately, once again reading between the lines shows that all the "growth" was completely hollow and entirely on the back of the ongoing massive inventory accumulation, which rose from 0.41% in Q2 to 0.83% in the first Q3 revision, to an epic 1.68% in the current revision, or nearly half of all the "growth" in the economy. As for the most important component of GDP - personal consumption it once again declined, and dropped from 1.24% of the GDP number in Q2 to 1.04% in the first revision, to just 0.96% in the final Q3 revision - this was the lowest consumption contribution to GDP since Q3 2009! Bottom line: the US consumer is getting ever weaker, even as retailers and producers are stocking up more and more inventory to take advantage of the lack of consumer spending power.
Of course, as the inevitable inventory liquidation takes place at cost or lower levels, expect Q4 GDP to crater, and we now see a 1% Q4 GDP as very possibly in light of this massive inventory build up in the last quarter. But since that number won't be out until early 2014, stocks are sliding because today's surge in GDP means a December taper is even more likely.
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