The U.S. Q3 GDP growth boost to 3.3%
The U.S. Q3 GDP growth boost to 3.3% from 3.0% tracked estimates with small but mostly offsetting surprises. Inventories were raised by a smaller than expected $3.2 B, which boosts prospects for Q4 growth, while net exports were raised by $1.0 B despite an assumed small downward bump, and consumption was trimmed modestly. Analysts saw the expected big hike in government construction spending, a trimming for nonresidential construction, and a hike for equipment spending. Analysts lifted our Q4 GDP estimate to 2.6% from 2.5%. The Q3 inventory bounce looks poised to be reversed in Q4 as seen with the Q4-Q1 inventory gyration last winter, leaving a weak inventory path since Q1 of 2015, and little sign of a bounce in the face of high I/S ratios. The factory rebound that is absorbing excess capacity has yet to move ahead of demand. The revised Q3 GDP figures reflect a quarter with respectable growth in consumption, exports, and fixed investment in equipment and intellectual property, with help from the rebound in global economic growth, but with a drop-back for the construction components and imports.