Q3 GDP Revised Above Highest Estimate, Prints 3.9%

Just as the OECD cut US GDP further, here comes the BEA with an impressive first revision to the Q3 GDP, which succeeded in fixing all those things that were lacking in the first report which said GDP had grown 3.5% in the quarter. Moments ago, the revised number slammed expectations of a modest decling to 3.3%, rising by3.9%, above the highest Wall Street estimate (range was 2.8% to 3.8%), with the boost coming from all those components that disappointed in the first go around, namely Personal Consumption (which rose from 1.8% to 2.2%), contributing 1.51% of the final GDP print, inventories subtracting far less, or just -0.12% compared to -0.57%, and fixed investment revised to 0.97% from 0.74%. Finally, while exports were revised modestly lower, a small decline in imports also offset the net decline in trade contribution.

In a nutshell:

  • 3Q GDP forecast range 2.8% to 3.8% from 81 economists
  • GDP rose to 3.9% compared to advance est. of 3.5% last month
  • Personal consumption rose 2.2% in 3Q after rising 2.5% prior quarter
  • GDP price index rose 1.4% in 3Q after rising 2.1% prior quarter
  • Core PCE q/q rose 1.4% in 3Q after rising 2.0% prior quarter

Visually:

 

And a long-term GDP history:

 

And while one may debate the calculation method, or whether the US is decoupling from the rest of the world, this latest data merely confirms that the Fed is certainly on track to hike rates in the summer of 2015 as it has been warning for a long time. Unless of course, the rebound that many economists had expected in Q4 GDP in fact took place in Q3, and unless the harsh winter proves to be just as bad as last year and lead to a collapse in the coming GDP prints.