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First Cut: Second estimate of 3Q GDP revised higher to up 2.1%; personal consumption and investment revised up

The second estimate of third quarter GDP was revised higher to up 2.1% (previously up 1.9%). With the fourth quarter already well advanced, the upward revision to third quarter GDP is a welcome piece of news, but not likely to sway thinking about the underlying pace of growth and a probable loss of momentum in the October-December period. That could change if it looks like consumer spending will rebound in November and December. I wouldn’t write off the possibility given the relatively high levels of consumer confidence.

Personal consumption expenditures have been the main source of growth in recent quarters. The contribution in the second estimate was 1.97 (previously 1.93) and reflected solid spending on durables (up 1.8%) and nondurables (up 4.3%) and more modest spending on services (up 1.7%).

There was a substantial upward revision for gross investment to a small down 0.1% (previously down 1.5%) that reflected less negative spending for nonresidential fixed investment at down 2.7% (previously down 3.0%) and no revision to residential fixed investment at up 5.1%.

Government government consumption expenditures were revised lower to up 1.6% (previously up 2.0%).

Net exports were a bit more of a drag than in the advance estimate at -$651.7 billion with a contribution of -0.11 (previously -0.08). The change in private inventories was revised up to $76.7 billion and now represents a positive contribution of 0.17 (previously -0.05).

 

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