The US has just released its first revision to its third quarter GDP report, and it came in line with consensus expectations of 2.8% and thus slightly below our forecast of 3.0%. The revised 2.8% GDP QoQ growth can be ascribed first and foremost to a larger than expected downward revision of personal consumption. Our personal consumption forecast of 3.3% (consensus: 3.2%) was 0.4%-point above the realised number. In addition, the contributions from non-residential investment and net exports were both revised down as we argued in the preview.
“Real personal consumption expenditures increased 2.9 percent in the third quarter, in contrast to a decrease of 0.9 percent in the second.
“Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.”
Personal consumption only contributed 2.07%-point to third quarter GDP according to the most recent estimate, while the initial October report estimated a 2.36%-point contribution.
Motor vehicles – that is Cash for Clunkers – contributed only 1.45%-point. The initial estimate had called for a 1.66%-point contribution to GDP. Cash for Clunkers, in other words, accounted for a larger relative share of the contribution from personal consumption and leads us to again ask: where is the private consumer? Billions upon billions have been spent through stimulus programs such as Cash for Clunkers and the best they manage is a 2.9% increase in consumption!
Private investment was revised down as expected. Inventories and residential investment both contributed slightly less at 0.87%-point (0.94%-point) and 0.45%-point (0.53%-point), respectively, while the contribution from non-residential investment dropped from -0.24%-point to -0.40%-point.
“Real exports of goods and services increased 17.0 percent in the third quarter, in contrast to a decrease of 4.1 percent in the second. Real imports of goods and services increased 20.8 percent, in contrast to a decrease of 14.7 percent.”
Exports grew relative to the initial report, but imports grew even more as we had argued. This was reflected in today’s report where the contribution from net exports posted a -0.83%-point compared to -0.53%-point in the October report. The continually weakening dollar throughout the quarter did not restrain Americans from upping their imports from than foreigners upped theirs.
Overall, this report does not quell our fears that part of the recent uptick in growth in based in stimulus and inventories. Disposable personal income fell an annualized 1.5% in the third quarter and underlines the fact that the consumer is still not looking too healthy.