U.S. Economy Expands at 2.8% Pace in 3Q – Fox Business
The U.S. economy grew faster than expected in the third quarter as businesses restocked shelves, but a slowdown in consumer and business spending pointed to an underlying weakness.
Gross domestic product expanded at a 2.8% annual rate, the quickest pace since the third quarter of 2012, the Commerce Department said on Thursday. It was an acceleration from a 2.5% clip in the second quarter and beat economists’ expectations for a 2.0% rate.
A day of fireworks that started with the stunner by Goldman’s head of the ECB has just gotten its second wind following the preliminary announcement of Q3 GDP, which roared from 2.5% to 2.84%, far above expectations of a 2.0% annualized number.
On the surface this was a bad number for Taper watchers, as it may mean the Fed will actually have to moderate its monthly flow precisely at the time when the ECB was forced to do “whatever it takes” in its fight with inflation, however a quick look at the internals shows that once again there is much more than meets the eye: because while the headline print was the strongest since Q3 2012, the core driver of economic growth, Personal Consumption, grew 1.5% below the expected 1.6%. Specifically, of the 2.84% number, PCE was just 1.04%, the lowest since Q2 2011!
Elsewhere, fixed investment – an indication of capex – was just 0.63%, below the 0.96% reported last quarter. So what drove “growth”? Why the traditional hollow component: Inventory, which amounted to 0.83% of the 2.8% print, double the 0.41% in the prior quarter. Net trade added an additional 0.3%, and finally government ticked on a modest 0.04% – the first positive contribution since Q3 2013.