In a recent update, the Bureau of Economic Analysis reported that the second estimate of the Q3 GDP remains unchanged at 2.8%, aligning with previous projections and marking a slight decline from the 3.0% growth recorded in Q2. This GDP growth figure, while modest, was accompanied by various indicators that highlight shifts in the economy during the quarter ending September 30. The personal consumption expenditure saw a notable increase of 3.5% on an annualized basis, albeit falling short of the anticipated 3.7%. Meanwhile, the GDP price index experienced a more significant increase of 1.9%, slightly exceeding estimates, which reflects ongoing inflationary pressures.
The BEA indicated that the deceleration in real GDP reflects a downturn in inventory investment and a more pronounced decline in housing investment compared to the previous quarter. These negative shifts were somewhat counterbalanced by increases in exports, consumer spending, and federal government spending, whereas imports continued on an upswing. The analysis emphasized that the increase in GDP was primarily attributed to growth in consumer spending, a boost in exports, and moderate gains in federal government and business investments during this period.
When dissecting the contributions to the GDP growth rate, personal consumption accounted for 2.37%, a decrease from the earlier estimate of 2.46%. Fixed investment exhibited a positive shift, contributing 0.31% to GDP, up from 0.24%. Private inventories, however, saw a slight decline, subtracting 0.11% from the GDP calculation. Net trade remained relatively stable, influencing the total by a subtraction of 0.58%, a marginal increase from the prior estimate. Government consumption also saw minor adjustments, contributing 0.83% to the GDP.
Investors and analysts are keenly reviewing the price data, and attention is shifting towards the core Personal Consumption Expenditures (PCE) report scheduled for release shortly. The BEA outlined notable trends in price changes, with the overall gross domestic purchases prices increasing by 1.9%, down from a 2.4% increase in Q2. Notably, the PCE prices rose 1.5%, showing a decrease from the previous quarter’s rise of 2.5%, while core PCE, excluding food and energy, rose by 2.1%, a slight miss compared to the expected 2.2%.
Corporate profits presented a mixed bag, as year-on-year corporate profits rose by 6.1% in Q3, down from a previous quarter increase of 10.8%. Within this data set, profits in the financial sector decreased by 0.4%, indicating a tougher market environment for financial institutions. Conversely, profits among Federal Reserve banks rose significantly from earlier losses, highlighting their ability to navigate changing economic conditions.
Overall, while the Q3 GDP report offers crucial insights into economic performance, the stale nature of the data suggests limited immediate impact on market sentiments. Analysts direct their focus towards the forthcoming core PCE report as it holds potential implications for forthcoming Federal Reserve decisions, particularly in an environment characterized by fluctuating consumer spending and inflationary pressures, casting a shadow on the broader economic outlook moving into the final quarter of the year.
