3Q19 GDP: 3Q Advance Reading Nearly Matches 2Q Pace

October 30, 2019
Bottom Line: Economic activity was slightly stronger than expected in the advanced reading of 3rd Quarter growth. Consumption slowed from the 2nd Quarter but several sources of drag in the 2nd Quarter (inventory and trade) were flat or slightly lower in 3Q, holding overall growth near 2% annualized. Real final sales have grown at a 2.1% annualized rate over the last 4 quarters. Bigger picture the expansion is down 41 quarters old but remains modest with an average annualized growth rate of 2.8%. Overall, this was a modest report for the 3rd Quarter, continuing to show convergence towards a 2% growth. Gross Domestic Product ROSE by 1.9% in the 3rd Quarter, higher than market expectations for an increase of 1.6%. During the 10 years of economic expansion, the economy grew at an average annual rate of 3.1% after declining at a 2.9% rate during the recession. Economic activity is now 2.0% ABOVE its year ago level and 27.4% ABOVE its pre-recession 2007 Q4 cyclical peak. Inventory Investment FELL by $0.4 billion, subtracting 0.05 percentage points from overall economic activity. Consequently, Real Final Sales ROSE by 2.0% and is now 2.1% ABOVE its year ago level. Imports ROSE by 1.2% and Exports ROSE by 0.7% so Net Exports FELL by $5.7 billion. This implies that Real Final Domestic Demand ROSE by 2.0% and is now 2.2% ABOVE its year ago level. Consumer Spending ROSE by 2.9%, contributing 1.93 percentage points to economic growth. Business Investment FELL by 3.0%, subtracting 0.40 percentage points to GDP. Intellectual property products increased by 6.6% while non-residential structures declined by 15.3%. Residential Investment ROSE by 5.1%, adding 0.18 percentage points to economic growth. Finally, Government Purchases ROSE by 2.0%, adding 0.35 percentage points to GDP. This was its 8th positive contribution in the last 12 quarters. The GDP Price Index ROSE by 1.7%, compared with market expectations of 1.9%. This is also 1.7% ABOVE its year ago level.