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Q3 GDP Soars To 3.6% On Massive Inventory Accumulation; Consumption Contribution Lowest Since 2009

Tyler Durden's picture


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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Thu, 12/05/2013 - 09:46 | 4217242 FreeNewEnergy
FreeNewEnergy's picture

Bullish, bitchez!

Thu, 12/05/2013 - 09:52 | 4217254 RSloane
RSloane's picture

What is bullish is the new formula for determining the GDP. Who knew these 'bad times' could be morphed so completely into 'good times'.

Thu, 12/05/2013 - 10:19 | 4217359 Everybodys All ...
Everybodys All American's picture

It's all in the formula. Just like when the government throws out all the food inflation and decides to ignore the core problem.

Thu, 12/05/2013 - 10:50 | 4217448 Race Car Driver
Race Car Driver's picture

> Who knew these 'bad times' could be morphed so completely into 'good times'.

Admittedly, I never saw it coming.

Thu, 12/05/2013 - 09:57 | 4217273 toady
toady's picture

3.6%! The recovery is in full swing!

Thu, 12/05/2013 - 10:15 | 4217339 Winston Churchill
Winston Churchill's picture

Bullish for pink slip printers.

This is my 6th or seventh rodeo.I've seen this show too many times.

A huge correction,maybe the last, next quarter.Whatever the FedRes does.

Keep your powder dry, you are going to need it.

Thu, 12/05/2013 - 10:30 | 4217395 ejmoosa
ejmoosa's picture

And yet...

Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $38.3 billion in the third quarter, compared with an increase of $66.8 billion in the second. Taxes on corporate income decreased $4.8 billion, in contrast to an increase of $10.0 billion. Profits after tax with IVA and CCAdj increased $43.0 billion, compared with an increase of $56.9 billion.
So the rate of profit growth fell, the rate of taxes collected fell, and the rate of profit growth after less taxes paid fell...
Sound like an economy that is improving?Not even close.
Thu, 12/05/2013 - 10:06 | 4217302 Max Damage
Max Damage's picture

A big number that bears no resemblance to GDP numbers 12 months ago due to all the fudges brought in. Sadly these fudges that have given false good numbers could end up causing more problems. Oh the irony!!!

Thu, 12/05/2013 - 10:16 | 4217347 SheepDog-One
SheepDog-One's picture

It's come full circle to a Charles Dickens novel's the best of times for .001%, worst of times for everyone else. Fuck off and die Tiny Timmy.

Thu, 12/05/2013 - 09:48 | 4217244 youngman
youngman's picture

There are going to be some good discounts in the next few weeks.....75% off or more....and probably some going out of business sales too..

Thu, 12/05/2013 - 09:48 | 4217246 TheFreeLance
TheFreeLance's picture

Great deals coming after XMas. Just hold out.

Thu, 12/05/2013 - 09:49 | 4217247 LawsofPhysics
LawsofPhysics's picture

Stuff those channels bitchez and let them eat cake!

Still waiting for some free flat bed trucks from GM.  Wait, it's coming....

Thu, 12/05/2013 - 11:09 | 4217518 toady
toady's picture

I'm on the inside track at a GM/Chevy dealer out in the sticks by my survival retreat. The guy is a 'lodge brother' he has bought in on TEOTWAWKI. He's made plans to give everything on his lot to the lodge brothers when TSHTF. He even thinks he can get on last delivery and has a list of colors/options from all us lodge brothers.

I'm almost looking forward to it.

Thu, 12/05/2013 - 11:36 | 4217602 CrashisOptimistic
CrashisOptimistic's picture

TEOTWAWKI will derive from no oil and so no gasoline to drive those cars you're excited about.

Thu, 12/05/2013 - 12:10 | 4217702 toady
toady's picture

I'm leaning towards financial collapse myself. Besides, I've made arrangements for the necessary petroleum products.

Thu, 12/05/2013 - 09:52 | 4217255 NoDebt
NoDebt's picture

Mr. Bernanke/Yellen:  I understand that lately you have been concerned about holding too much of the US Treasury market through your QE operations.  May I suggest a new asset class you can purchase?


General Motors


Thu, 12/05/2013 - 09:53 | 4217256 LawsofPhysics
LawsofPhysics's picture

Don't worry,  Kyle Bass is on his way...

Thu, 12/05/2013 - 10:02 | 4217288 SAT 800
SAT 800's picture

Dont't put ideas in their heads. 3.6% GDP+; hmm. hm. empty housing development; real-estate companies out of business; half a parking lot to play frisbee in at Wal Mart on Saturday; no traffic; got the road to myself; not that I want to use it. Yep, sure lools like a boom to me, alright.

Thu, 12/05/2013 - 10:13 | 4217329 NoDebt
NoDebt's picture

It is a bit of a mind-bender sometimes.  Watched a brand new Ferrari drive past a shuttered office park not far from my office yesterday.  I've seen quite a few Ferraris, Maseratis, etc. the last year or so.

It's all happening again.

Thu, 12/05/2013 - 10:23 | 4217373 SAT 800
SAT 800's picture

You're right; it's getting surreal.

Thu, 12/05/2013 - 09:52 | 4217258 bdub2
bdub2's picture

I'm not trying to sound like a know it all, but, um, I've been looking into this QE thinga jig, and as long as they kickin' it, we all good. 

There is, how can I say this: I know! all caps=NOTHING that will ever stop this market. Buy. now. buy the dip, buy the high. Buy everything except useless metals.

We are in the sixth inning of the greatest rescue ever from the most brilliant patriots in history: Our Federal Reserve. I love everything life has become. Join in the Greatest American Re-Revolution!



Thu, 12/05/2013 - 09:56 | 4217271 bdub2
bdub2's picture

The "/" means sarc....damn, even overboard sarc is getting trashed. I'm going back to blog site where people get it. 


Thu, 12/05/2013 - 10:04 | 4217301 SAT 800
SAT 800's picture

I think you've successfully avoided sounding like a know it all.   /

Thu, 12/05/2013 - 10:09 | 4217319 HardlyZero
HardlyZero's picture

This story screams "Channel Stuffing for Thanksgiving !!"

Thu, 12/05/2013 - 10:59 | 4217486 Race Car Driver
Race Car Driver's picture

> I love everything life has become.

A worthy read for anyone who needs a primer on how we got here:

The Dark-Side Psychology Behind Holiday Madness


Thu, 12/05/2013 - 09:53 | 4217259 Oldballplayer
Oldballplayer's picture

And we can buy it all with bitcoin.



Thu, 12/05/2013 - 10:15 | 4217260 Cursive
Cursive's picture

Wal-Mart's best selling item on Black ThuFriday?  The $0.29 bath towel.  If you ain't selling consummables to the proles or jewelery to the 1%, you ain't in the right retail business.  The after X-mas sales will be spectacular (not that any of us will need the marked down Chinese crap).


ETA:  Here's a source for the Wal-Mart thing.  $1.74/6 towels = $0.29 per towel.

Thu, 12/05/2013 - 10:25 | 4217386 SAT 800
SAT 800's picture

boy, I bet that's a really high quality towel; too.

Thu, 12/05/2013 - 12:15 | 4217716 markar
markar's picture

A Handi Wipe will last longer

Thu, 12/05/2013 - 09:54 | 4217261 Bosch
Bosch's picture

Well I guess the drunk analyst at Deutsche was right after all.  Good for him.  I mean, he'll probably still he laid off when the market takes a shitter, but he'll always have this.



Thu, 12/05/2013 - 09:55 | 4217263 10044
10044's picture

The algos dont give a fcuk about "between the lines" which is a shame...personally I can't wait till all human traders are replaced with fcuking algos, maybe that'll wake up michelle crusoe cabrera and her shitty "liquidity provider" thesis

Thu, 12/05/2013 - 10:11 | 4217321 Bangin7GramRocks
Bangin7GramRocks's picture

You fucking mis-fucking spelled fucking fuck two fucking times fucker!

Thu, 12/05/2013 - 10:25 | 4217384 swmnguy
swmnguy's picture

Obscenity is the crutch of inarticulate fuckers.

Thu, 12/05/2013 - 10:48 | 4217436 Bangin7GramRocks
Bangin7GramRocks's picture

This is fight club pumpkin! If you are going to write the work fuck, write the word fuck.

Thu, 12/05/2013 - 10:01 | 4217264 ejmoosa
ejmoosa's picture

The future must be in warehousing.  

Meanwhile, everyone I know is cutting back their individual purchases, downsizing homes and reducing their fixed costs.


Perhaps all this inventory will appease the masses when the rioiting starts.  

Thu, 12/05/2013 - 09:56 | 4217265 thismarketisrigged
thismarketisrigged's picture

i really pray they fucking taper, but as we all know, they cant.


the funny thing is the msm thinks if they taper its good news because that means the economy is doing well, but the reality is the economy is fucking awful and the fed will find out real fast if they do taper just how much there liquidity was actually the reason for higher stock prices all along, which according to them, there is no bubble.


taper fuckers, i fucking dare u, i will get a great joy if u do.

Thu, 12/05/2013 - 10:32 | 4217400 SAT 800
SAT 800's picture

Tapering might be the iceberg that the SS Federal Reserve didn't notice. If it starts going down by the bows; don't hesitate.

Thu, 12/05/2013 - 09:57 | 4217269 Yen Cross
Yen Cross's picture

      Thanks for the GDP breakdown Tyler. Nice work as always. 

   The dollar spiked up and took the usd/jpy with it only 20+ pips. Should have been much more. Now the dollar has fallen back and so has usd/jpy. If real taper fears start to materialize and the dollar really takes off, don't expect usd/jpy to follow.

Thu, 12/05/2013 - 10:02 | 4217291 Grande Tetons
Grande Tetons's picture

No Taper. They can't fuck up Christmas. 

Long AuD/JPY with a 90.8 stop. 

Thu, 12/05/2013 - 10:08 | 4217307 SAT 800
SAT 800's picture

Sounds like a rational trade. Good Luck.

Thu, 12/05/2013 - 10:09 | 4217312 SAT 800
SAT 800's picture

For what it's worth, (nothing), I think the AUD is at a bottom in a periodic wave of sentiment thing; herd mentality, you know; fundamentally it's a strong currency.

Thu, 12/05/2013 - 10:19 | 4217336 Yen Cross
Yen Cross's picture

   I think you're right on with that call.  Same thing with Cable reversed. 75% of U.K. GDP is service based. (financial services)

 The manufacturing and construction PMIs were ok this week, but the services PMI missed badly.

Thu, 12/05/2013 - 10:34 | 4217405 SAT 800
SAT 800's picture

Agreed. GBP is about done; time to put a fork in it.

Thu, 12/05/2013 - 10:14 | 4217342 Grande Tetons
Grande Tetons's picture

That, and it has been pummled against the KIWI as well.  No respect I tell yah. 

Thu, 12/05/2013 - 10:09 | 4217316 LawsofPhysics
LawsofPhysics's picture

A reasonable trade.  Seems the bernanke wants us all to become day-traders again, microsecond traders even...

Thu, 12/05/2013 - 10:17 | 4217358 Grande Tetons
Grande Tetons's picture

Bernanke has fucked me right out of trading equites.  I just stick to FX...a lot of the same themes...but at least I am not directly supporting equities.  That is my only form of revolt. 

Thu, 12/05/2013 - 10:36 | 4217406 LawsofPhysics
LawsofPhysics's picture

Save in physical assets, no matter what, because when fraud is the status quo (as it is now), possession is the law (especially when the supply lines break in earnest).

Thu, 12/05/2013 - 09:59 | 4217278 falak pema
falak pema's picture

As John Major said: the world of tomorrow belongs to the new giants of the new financial age : USa and UK.

We be the men!


So... a revitalised UK industrial environment, where today its production is LOWER than in 2007 BUT which shows a 2.6% Q growth and a 3.6% Q growth in US GDP means blue skies are here again forever more. 2014, 2014 not like 1914, 1914! 

True, true if debt is asset and banks never have to pay back their debts thanks to carry trades and derivative gravy fed on ZIRP. And let those banks scam us even more in every asset market in the world.

Meanwhile step on that gas of QE stimulated printing to blast off the "real" virtual economy.

Or is it the real "virtual" economy?

Or worse, the "virtual" virtual economy, while we freeze in the real one!

Thu, 12/05/2013 - 10:01 | 4217282 1stepcloser
1stepcloser's picture

New GDP algo paying off...Don't like the number, change it..   So we can taper now??? Right?  Tap Tap Tap is this thing on?  McFly anyone...can you hear me out there..

Thu, 12/05/2013 - 10:02 | 4217285 adr
adr's picture

Do you need to have actual inventory for GDP anymore?

Make intangible inventory count. If you just think of selling a new product, all that product to be eventually produced will count in GDP. If we count every product thought of, imagine the growth potential.

Even government spending counts towards GDP. I guess if I use my credit card to go nuts and buy everything I see, it's good for the economy now. But if I decide to never pay the money back, somebody's got to eat the loss. Not going to be very good when somebody has to eat the multi trillion dollar credit line of the USA.

Thu, 12/05/2013 - 10:12 | 4217324 SAT 800
SAT 800's picture

I'm a little embarrassed to say it; but I don't actually understand the concept of building inventory in the face of declining consumer buying capacity. I must be missing something really obvious here to the business school graduates; but I can't figure out what it is. I tried to read an economics textbook once, but decided it was delusional.

Thu, 12/05/2013 - 10:27 | 4217389 LawsofPhysics
LawsofPhysics's picture

Here, let me help.  Over 40% of the eCONomy/GDP is now in "finance", you tell me...

what is the real value of all that paper-pushing

Fuck em, roll the mother fucking guillotines and let's clean house.

Thu, 12/05/2013 - 10:57 | 4217478 Legolas
Legolas's picture

Agreed.  Roll the guillotines up I-95 into Mordor.  Let's see the mouth of Sauron (Jay Carney) treat with that !

Thu, 12/05/2013 - 10:31 | 4217397 swmnguy
swmnguy's picture

I think you have to have an MBA to understand it.  In the same way that you have to have an advanced Liberal Arts degree to understand how ObamaCare could possibly do what it's purportedly intended to do.

Thu, 12/05/2013 - 10:49 | 4217442 Legolas
Legolas's picture

As a general rule, goods expected to be consumed this quarter and next quarter have already been manufactured in the previous two quarters.  When an inventory glut appears, someone forecasted incorrectly.  Inventories should be sky high at the end of Q4, unless spending increases.  And we all know that aint happening this year.

Thu, 12/05/2013 - 14:56 | 4218499 SDShack
SDShack's picture

Watch those consumer spending numbers once 0zer0care Sticker Shock turns into 0zer0care Wallet Drain after Jan 1.

Thu, 12/05/2013 - 10:02 | 4217292 Caviar Emptor
Caviar Emptor's picture

3.6 Cheers for Biflation!
The more we print, the less we can afford!

Thu, 12/05/2013 - 10:06 | 4217299 Quinvarius
Quinvarius's picture

Do you expect them to announce bad news before Christmas?  This is no different than when Obama was running for re-election.

On the other hand, if velocity is really picking up, and money is being mobilized, Peter Schiff is about to be proven correct again.

Thu, 12/05/2013 - 10:04 | 4217300 Max Damage
Max Damage's picture

A big number that bears no resemblance to GDP numbers 12 months ago due to all the fudges brought in. Sadly these fudges that have given false good numbers could end up causing more problems. Oh the irony!!!

Thu, 12/05/2013 - 10:06 | 4217303 youngman
youngman's picture

With all this growth....3.6% and the unemployment dropping.....In Econ 101 means inflation is just around the should be good for PM's.....NOT...Gold dropped back down...Silver too...oh well back to college for me...I need to learn the new Econ they are old stuff is not working anymore

Thu, 12/05/2013 - 10:14 | 4217334 SAT 800
SAT 800's picture

Let us know when you get it figured out; personally, I feel I'm dancing in a dark room and tripping over the furniture. Clueless, would be an improvement from where I am.

Thu, 12/05/2013 - 10:06 | 4217305 Australian Economist
Australian Economist's picture

Smells like a buildup of malinvestment to me

Thu, 12/05/2013 - 10:18 | 4217335 HardlyZero
HardlyZero's picture

Stuffing with Turkey talk..../mmmm good.


What are the "Private Inventories" ?  Prepping inventories ? 

Thu, 12/05/2013 - 10:07 | 4217309 q99x2
q99x2's picture

First they isolate themselves. Then they believe their fantasies are true. Then they commit suicide.

Thu, 12/05/2013 - 10:10 | 4217325 LawsofPhysics
LawsofPhysics's picture


Thu, 12/05/2013 - 10:14 | 4217341 SAT 800
SAT 800's picture

You beat me to it! Gave you a one up for that.

Thu, 12/05/2013 - 10:22 | 4217368 HardlyZero
HardlyZero's picture

Truthiness while we effort.

Its all good.

What could be better ?

At least we made it this far.

Thu, 12/05/2013 - 10:09 | 4217315 Seasmoke
Seasmoke's picture

Dig that hole. Fill it back up. Dig that hole Fill it back up. 

Thu, 12/05/2013 - 10:12 | 4217328 d edwards
d edwards's picture

Don't forget the gov't re-jiggered the way they compute GDP-more bullshit propaganda.

Thu, 12/05/2013 - 10:12 | 4217331 deerhunter
deerhunter's picture

We are eating the multi trillion dollar credit line of the US every day.  Starve the beast.  If you are W-2 employee go into HR and claim 12 dependants on your withiholding form.  No more money going to the Feds every week.  If 20% of the W-2 workforce did this it would get their attention.  It is the only thing they understand.  The whole world knows the US "full faith and confidence" is about the same as "the check is in the mail".  China is buying everything that is not tied down and making alternate currency deals with everyone who will do it.  I don't think they can shut down the power of the petrodollar but they damn sure can flood the world with useless US Treasuries. I think "may you live in interesting times" is upon us.  On a side note,  I took the 80 turnpike across Ohio  16.50 Indiana 12.50 and parts of PA,, dont remember.  My God,  wait til they tax the air we breathe.  Oh,  wait a minute,  talk to Al Gore.  Good day all.

Thu, 12/05/2013 - 11:06 | 4217506 odatruf
odatruf's picture

At least those are large states. It's that much through tiny Delaware and Jersey.

The problem with your withholding plan is that there aren't 20% who care or get it. Plus if actual tax dollars slowed, the Fed would just lend .gov more. And there would be no consequence.

Thu, 12/05/2013 - 10:15 | 4217340 Bobbyrib
Bobbyrib's picture

Dump all the inventory in the ocean and start accumulating again next year. What is the problem? /sarcasm.

Thu, 12/05/2013 - 10:16 | 4217353 SAT 800
SAT 800's picture

Oh, so that's the plan. I knew there was something I wasn't getting.

Thu, 12/05/2013 - 10:16 | 4217349 Pesky Labrador
Pesky Labrador's picture

I think they're coming to an end of loaning money to the consumers. Unless more people are doing chapter 7, you can only have so many payments a month until there is nothing left.

Thu, 12/05/2013 - 10:19 | 4217362 SAT 800
SAT 800's picture

Really? Is that the way it works. How interesting. What happens then, they send you a new City Bank Card in the mail and you get to do it over?

Thu, 12/05/2013 - 11:17 | 4217543 Winston of Oceania
Winston of Oceania's picture

Not when you just got dumped off of your health plan, Christmas and the New Year for many will just plain suck. Not knowing is what kills the golden goose...

Thu, 12/05/2013 - 11:35 | 4217594 Pesky Labrador
Pesky Labrador's picture

heh @ SAT

There are those who will no doubt jump on the *new* cards and not care about the 3% fee for a balance transfer and zero % APR for 12 months. Now don't get me wrong, you can surf the debt for 0% interest but eventually one is going to hit the cap on their limit.

Thu, 12/05/2013 - 10:21 | 4217371 deerhunter
deerhunter's picture

charge card offers in the mail now at least twice a week.  Last time it was like this?  2008.  Priceless.  Hold on this is going to be an interesting ride.

Thu, 12/05/2013 - 10:44 | 4217425 SAT 800
SAT 800's picture

Last time someone told me that it was my acrobatics flight instructor in an AT-6; I held on so tight I left fingerprints in the steel fuselage tubing. I hope this isn't going to resemble that. It turned out I wasn't cut out for acrobatics; I just can't used to the idea that the Ocean is over your head at the top of the windshield and the sky is down below your feet someplace; it makes my inner monkey sick.

Thu, 12/05/2013 - 10:24 | 4217375 autofixer
autofixer's picture

3.6%?  What 2.6% is "intangibles"?

Thu, 12/05/2013 - 10:44 | 4217429 orangegeek
orangegeek's picture



Just like China does it.


Now who wants a $90 60 inch flat screen TV - we have warehouses full of them!!!!!




Thu, 12/05/2013 - 11:24 | 4217566 SimpleSimon
SimpleSimon's picture

Almost in time for Thanksgiving - a GDP stuffed turkey!!

Thu, 12/05/2013 - 12:05 | 4217685 The Merovingian
The Merovingian's picture

Is truth stranger than fiction, or what??

“But I don’t want to go among mad people," Alice remarked.
"Oh, you can’t help that," said the Cat: "we’re all mad here. I’m mad. You’re mad."
"How do you know I’m mad?" said Alice.
"You must be," said the Cat, or you wouldn’t have come here.” 

Lewis Carroll, Alice in Wonderland

Thu, 12/05/2013 - 17:49 | 4219151 kenezen
kenezen's picture

When consumption, one of two primary components of any market, is dropping look to a following of lower MFG. Don't be suprised if it is bouncy but, then goes considerably lower. WE're talking S&P and Dow. Look for high fake outs and have fun.  

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