Q3 GDP-Adv.
Updated 19-Nov-09 19:26 ET
Highlights
- As expected, GDP growth in Q3 went positive for the first time in four quarters. GDP performed better than expected as output grew by 3.5% quarter-over-quarter annualized compared with the consensus expectation of 3.2%.
- Demand was strong across all sectors of the economy as consumption increased 3.4%, gross private domestic investment increased 11.5%, exports increased 14.7%, imports increased 16.4%, and government expenditures rose 2.3%.
- With all sectors seemingly humming along in Q3, final sales of domestic product jumped 2.5% compared with an increase of only 0.7% in Q2.
- Finally, as the economy has begun to strengthen, the import sector rebounded strongly and overtook the increase exports. This resulted in net exports contributing a negative component to GDP for the first time since Q2 2008.
- The GDP deflator increased a less-than-expected 0.8% in Q3 as the consensus forecast an increase of 1.4%.
- Raw Data Available At: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Key Factors
- Unfortunately, a more detailed look at where economic growth occurred makes it difficult to pronounce a full sustainable recovery is on its way.
- Government assistance played an extremely large role in producing the positive GDP result.
- For example, the Cash for Clunkers stimulus package boosted motor vehicle sales and contributed 1.01 percentage points out of the 2.36 percentage points that personal consumption added to GDP.
- Further, the first-time homebuyers tax break has benefited not only the construction firms, who have ended their decline in manufacturing new homes, but also realtors through increased income/fees. The jump in realtor expenses accounted for a full third of the increase in the residential investment component.
- Inventories provided positive growth to GDP for the first time since Q3 2008. However, the data is a little misleading. GDP is measured as a rate of change between quarters. Inventories actually declined by $46.3 billion in Q3. However, the drop in Q2 was so severe that the rate of change was actually positive $29.4 billion. We expect inventories to continue to improve over the next year and provide a strong bonus to GDP.
- In other investment, equipment and software increased 1.1%. The jump was slightly more than expected considering shipments of nondefense capital goods excluding aircraft declined over the last couple of months.
- The jump in the GDP deflator was mainly due to increased oil prices which pushed nondurable goods prices up 9.6%. However, import prices rose more than expected, which pushed the total prices lower than expected.
Big Picture
- The US has finally exited the recession, but growth prospects remain weak. Exit could not have been done without the extreme measures the goverment has pushed through over the last two quarters. As the inventory cycle continues to rev up, it expected that GDP will continue to grow throughout 2010. However, inventory growth will not result in more jobs and consumption could fall as government stimulus wanes in beginning of next year.
| Category |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
| GDP |
3.5% |
-0.7% |
-6.4% |
-5.4% |
-2.7% |
| Inventories (change) |
-$130.8B |
-$160.2B |
-$113.9B |
-$37.4B |
-$29.7B |
| Final Sales |
2.5% |
0.7% |
-4.1% |
-4.7% |
-2.9% |
| PCE |
3.4% |
-0.9% |
0.6% |
-3.1% |
-3.5% |
| Nonresidential Inv. |
-2.5% |
-9.6% |
-39.2% |
-19.5% |
-6.1% |
| Structures |
-9.0% |
-17.3% |
-43.6% |
-7.2% |
-0.1% |
| Equipment & Software |
1.1% |
-4.9% |
-36.4% |
-25.9% |
-9.4% |
| Residential Inv. |
23.4% |
-23.3% |
-38.2% |
-23.2% |
-15.9% |
| Net Exports |
-$348.3B |
-$330.4B |
-$378.5B |
-$590.5B |
-$757.5B |
| Export |
14.7% |
-4.1% |
-29.9% |
-19.5% |
-3.6% |
| Imports |
16.4% |
-14.7% |
-36.4% |
-16.7% |
-2.2% |
| Government |
2.3% |
6.7% |
-2.6% |
1.2% |
4.8% |
| GDP Price Index |
0.8% |
0.0% |
1.9% |
0.0% |
4.1% |
