In today's anticlimatic economic print of the day, moments ago the BEA reported that Q3 GDP [4]declined from 2.1% as per the first revision reported a month ago to 1.97%, fractionally higher than the 1.9% expected, as a result of a modest decline in Personal Consumption Expenditures as well as Private Inventories and Net Trade, offset by a fractional pick up in Fixed Investment, a category which will see far more downside in the quarters to come unless oil prices rebound, and the smallest possible increase in government spending.
[5]
As the detailed breakdown chart below shows, there were no material changes among the key GDP categories.
[6]
PCE printed at 3.0% in the final revision, same as a month ago, and above the 2.9% expected. Looking at the personal consumption components shows where the changes were: while Financial Services and Insurance saw an annualized drop of $9.4 billion to $729.5 billion, this was offset by another increase in recreation services ($3.1BN), Furnishings and Durable Household Equipment ($2.9BN), and Gasoline and energy goods which rose $1.5 billion.
For those curious what the long-term trend of sequential, not current quarter annualized, GDP growth looks like, at 2.1% it is well below the 2.9% annual growth rate posted just one year ago.
[7]
That said, the biggest risk remains in the one category we have flagged since the summer [8]: Private Inventories, which while revised modestly lower from a change of $100BN in Q3 to $95.3BN, still suggest there is a massive inventory overhang heading into Q4 and 2016, one which will likely impact GDP by at least 1.5%-2% if not more once this long overdue inventory liquidation takes place.
[9]
