Third Quarter GDP Revised Downward

A downward revision to inventories pulled down the third revision to third-quarter GDP, coming in at an annualized and expected rate of 2.0 percent. Revised inventory growth, at $85.5 billion vs an initial $90.2 billion, was the most negative factor in the quarter, which is actually a plus of sorts as businesses held down inventories due to slowing sales, a move that should limit future disruptions in production and employment. Personal consumption expenditures include a downward revision to service spending, now at an annualized 2.1 percent for a 1 tenth decline. The drag from net exports was raised slightly to $11.5 billion. On the plus side, residential fixed investment was upgraded to a very strong 8.2 percent for a 9 tenths upward revision. Nonresidential fixed investment was also upgraded, up 2 tenths to an annualized plus 2.6 percent in the quarter. In sum, the third-quarter came in at a respectable rate, down from an outsized 3.9 percent bounce in the second quarter that followed a weather depressed 0.6 percent rise in the first quarter. Fourth-quarter GDP is tracking at roughly 2 percent and is likely to get a bounce from the current spree of mild weather.

Recent History Of This Indicator:
The Econoday consensus is calling for a 1 tenth dip in the third estimate for third-quarter GDP to plus 2.0 percent. Apart from inventories where change is sometimes hard to interpret, demand indications in the second estimate were very solid with final sales up 2.7 percent.