A month ago the US economy was said to have grown only 1.5%, driven by a long-overdue and perhaps welcome correction to inventories. Moments ago we got the first revision to the Q3 GDP, which as consensus expected rose from 1.5% to 2.1%, however for all the wrong reasons because while personal consumption actually decline from a 3.2% increase, and a 2.19% contribution to the GDP bottom line, it is now said to have grown only 3.0%, adding 2.05% to the final GDP print.
So what drove the jump?
The "old faithful" plug to "growth" inventories, which instead of dropping at an annualized 1.44% as in the original release, declined just 0.59% annualized, meaning that instead of contributing $62.2 billion, inventories jumped a material $100.6 billion, confirming that the inventory liquidation is still to take place, and as a result we now expect substantial downward revisions to Q4 GDP in the coming hours as Wall Street has no choice but to assume the inventory reduction will now be shifted to Q4.
The summary GDP print:
[3]
The detail:
[4]
And the inventory contribution to GDP, showing that Q3 increase from $62.2 billion to a whopping $100.6 billion.
Spot the "revision"
[5]
The punchline: if it wasn't for the $40 billion surge in inventories shown above, Q3 GDP would be 1.2%!
