Main takeaways:
  • GDP growth in Q3 at 1.5%, close to market consensus.
  • Inventories cut 1.4pp from growth in the quarter...
  • ...but quarterly swings in inventories have not changed overall growth path in the recent past.
  • Domestic demand growth is growing at "solid rates" -- to use the upgraded sentence in the FOMC statement.
  • Growth remains above potential => labor market likely to continue improving.
US GDP rose 1.5% in 3Q, close to bloomberg consensus. Consumption increased a healthy 3.2% (contributing 2.2 pp) and investment growing 2.9% (contributing 0.5pp). Domestic demand growth appears consistent with FOMC's description of "increasing at a solid rates in recent months".

Inventories were the main drag, cutting 1.4pp from growth in the quarter. The positive surprise was the flat contribution of net exports against an expected drag.


Inventory changes can be a key component of quarterly changes in growth, but they have not changed the overall trend. The charts below plot GDP and Final Sales (GDP less inventories) together with a trend since mid-2009 and a trend in the last two years.
Both GDP and Final Sales share the same 2.0% growth trend since the end of the recession and 2.5% growth trend in the last two years.



Important to highlight that current pace of growth appears to be above potential, therefore hinting that underutilization of labor resources would likely continue to diminish.