U.S. GDP Growth Stable At 2.0%

Real GDP increased 2.0% (SAAR) last quarter. The increase roughly matched Q2 as well as expectations for a 2.1% rise according to the Bloomberg survey. So far since the last recession GDP growth has averaged 2.8%, a figure that is less than half the average following other, severe, postwar recessions. 

Propping up growth last quarter was an increase in the contribution from inventory accumulation to 1.4 percentage points, nearly double the Q2 effect. Moreover, there was less of a subtraction from foreign trade deficit deterioration. Its 2.0 percentage point subtraction from growth was due to a 5.0% (12.2% y/y) gain in exports which was outpaced by a 17.4% rise in imports (16.3% y/y).

Growth in domestic final demand decelerated sharply from 2Q to 2.5% from 4.3%. Residential investment more-than-reversed all of its 2Q gain falling to a level nearly two-thirds below its 2005 peak Growth in business fixed investment nearly halved to 9.8% though that still was the third consecutive quarter of robust increase. Last quarter's gain was led by a 12.0% y/y rise (17.9% y/y) in equipment spending paced by transportation equipment. That was accompanied by a 3.8% rise (-1.9% y/y) in structures. Growth in government spending also slackened helped by another decline in state & local government spending (-1.4% y/y). Finally, consumer spending had a stabilizing influence with 2.6% growth that was led by a 6.1% advance (5.1% y/y) in durable goods spending. The gain mostly reflected strength in recreational goods & vehicles (12.5% y/y).

Price inflation as measured by the chained GDP price index ticked up to 2.3% though the 1.2% yearly advance was near the lows of the early-1960s. The personal consumption chain price index rose 1.0% (1.4% y/y). The price index for fixed business investment increased a bit  by .09% q/q (-1.0% y/y) and the residential investment price index fell marginally (0.3% y/y).