3Q20 GDP: Small Revisions, 4Q Could Be 5-10%

Bottom Line: The third estimate of 3rd Quarter GDP was slightly higher, aided by upward revisions to consumption and residential investment. As we know well, the rebound in consumption was historic after the equally historic declines due to the initial shutdowns for the novel coronavirus. Residential investment and business fixed investment have also been strong drivers of the recovery with a shift in demand towards single-family homes and increased auto production. Of course, this is largely old news with only 9 days left in the 4th Quarter. Consumption likely slowed substantially but remained above the long-term trend in the 4th Quarter. Residential investment remained strong. Consensus forecasts hover around 4.5% -- but the early part of the quarter was stronger with the Atlanta Fed's GDP Now model (based mostly on October and some November data) reading 11+%. GDP was REVISED HIGHER by 0.3 percentage points to 33.4% in this third estimate for 2020 3rd Quarter. This compared with market expectations for no change revision to 33.1%. Economic activity is now 2.8% below its year-ago level. In final sales categories, fixed investment, residential investment, consumption, and government purchases were revised slightly higher while, net exports were revised lower. As a result of all of these changes, real final sales was revised up by 0.3 percentage points to 25.9% while real domestic demand was revised up by 0.4 percentage points to 29.8%. The GDP Price Index was REVISED LOWER by 0.05 points to 3.4%, compared with market expectations no change at 3.6%. Economy-wide prices are now 1.1% ABOVE year-ago levels.