GDP

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GDP

Released On 11/7/2013 8:30:00 AM For Q3a:2013 Prior Consensus Consensus Range Actual Real GDP - Q/Q change - SAAR 2.5 % 2.0 % 1.5 % to 2.7 % 2.8 % GDP price index - Q/Q change - SAAR 0.6 % 1.4 % 0.9 % to 1.9 % 1.9 %

Highlights GDP growth for the third quarter surprised on the high side but inventories played a big role. Real GDP grew 2.8 percent in the third quarter, following a 2.5 percent rise the quarter before. Analysts projected a 2.0 percent rise. By contributions to growth, it was a mix. PCEs rose an annualized 1.5 percent, contributing 1.04 percentage points to GDP. Inventories gained $86.0 billion, following a $56.6 billion increase in the second quarter-leading to a third quarter contribution of 0.83 percentage points. However, PCEs slowed for the quarter after a 1.8 percent increase in the second quarter. Net exports played a notable role in the boost to GDP growth but in the wrong way. Import growth decelerated to 1.9 percent, following a 6.9 percent jump in the second quarter. Essentially, demand slowed. Exports grew but at a slower pace of 4.5 percent versus 8.0 percent in the second quarter. Housing investment remained healthy as did nonresidential structures. Equipment investment slipped while government purchases were basically flat. But overall demand is sluggish. Final sales of domestic product rose 2.0 percent in the third quarter after a 2.1 percent increase the prior period. Final sales to domestic purchasers softened to a 1.7 percent gain, following a 2.1 percent rise in the second quarter. Inflation was a little warmer than expected. The overall GDP price index rose 1.9 percent, following a 0.6 percent annualized gain in the second quarter. Market expectations were for a 1.4 percent annualized gain. Excluding food and energy, inflation was 1.9 percent in the third quarter, following a 0.9 percent rise the previous quarter. Overall, the economy is not as strong as the headline suggests. We may see some pullback in the fourth quarter on inventories. On the news, equities were little changed.

Market Consensus before announcement GDP for the third estimate for the second quarter was left unchanged at an annualized rate of 2.5 percent compared to the second estimate and compared to a first quarter rise of 1.1 percent. The biggest positive note was that demand numbers were bumped up slightly-though remained sluggish. Final sales of domestic product were revised up to 2.1 percent from the second estimate of 1.9 percent. This series increased 0.2 percent in the first quarter. Final sales to domestic producers (which exclude net exports) also were nudged up to 2.1 percent versus the second estimate of 1.9 percent. This followed a 0.5 percent gain in the first quarter. Headline inflation for the GDP price index was revised down to 0.6 percent compared to the second estimate of a 0.8 percent annualized inflation rate. When excluding food and energy, inflation for the second quarter was nudged down to 0.9 percent from the second estimate of 1.1 percent annualized.

Definition Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.  Why Investors Care

Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable. Data Source: Haver Analytics

It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes. Data Source: Haver Analytics