United States: Economic growth in Q3 stronger than previously estimated
November 27, 2019
According to a second GDP estimate released by the Bureau of Economic Analysis, the economy fared better than previously reported, with GDP growth accelerating in the third quarter to 2.1% in seasonally-adjusted annualized terms (previously reported: +1.9% SAAR), up from the 2.0% expansion registered in the second quarter. In annual terms, growth was unchanged at 2.1% in Q3, down from 2.3% in Q2.
The revised GDP reading was largely due to a greater contribution to growth from a private inventory build-up, which was revised up to 0.2 percentage points from an almost negligible effect in the advance estimate (Q2: -0.9 percentage points). Moreover, business fixed investment posted a slightly softer contraction than in the first reading (Q3: -2.7% SAAR; previously reported: -3.0% SAAR; Q2: -1.0% SAAR). On the downside, government consumption expanded at an even slower rate of 1.6% in the third quarter (previously reported: +2.0% SAAR; Q2: +4.8% SAAR) due to weaker growth in state and local spending. Meanwhile, private consumption growth was unchanged at 2.3% in Q3 (Q2: +4.6% SAAR), while the strong rebound in residential investment was unrevised.
Turning to the external sector, the recovery in exports of goods and services was somewhat stronger than previously estimated, with growth clocking in at 0.9% (previously reported: +0.7% SAAR; Q2: -5.7% SAAR); however, imports of goods and services also fared better than reported in the advance estimate (Q3: +1.5% SAAR; previously reported: +1.2% SAAR). Consequently, the drag on growth from net trade was unchanged at 0.1 percentage points in Q3 (Q2: -0.7 percentage points).
Commenting on the GDP revision, Leslie Preston, senior economist at TD Economics, noted:
“Today’s GDP revisions do not change much about the picture of the U.S. economy, as a build-up in inventories is rarely a sign of economic strength. The overall narrative of an economy that has slowed from around three percent (annualized) growth to two percent remains intact.”