U.S. GDP Growth Firms in Q3; Price Index Strengthens

Real GDP in the third quarter grew 4.9% (SAAR) following a 2.1% Q2 increase and a 2.2% Q1 gain. It was the strongest increase since the fourth quarter of 2021 and lifted y/y growth to 2.9%, the firmest since the beginning of last year. The Action Economics Forecast Survey expected a 4.5% gain.

Real final sales to domestic purchasers grew 3.5% (2.5% y/y) following a 2.0% rise in Q2. Personal consumption expenditures grew 4.0% (2.4% y/y) following a 0.8% rise and added 2.7 percentage points to Q3 growth. Durable goods spending growth of 7.6% (4.9% y/y) followed a 0.3% slip. Motor vehicle expenditures rose 1.3% (6.2% y/y) after falling 9.1%. Furniture & appliance buying rose 7.1% (1.9% y/y) after holding steady in Q2 while recreational goods & vehicle purchases surged 15.8% (8.1% y/y) after strengthening 11.2% in Q2.

Nondurable goods outlays improved 3.3% (1.3% y/y) after minimal improvement in Q2. Apparel outlays rose 6.7% (0.3% y/y) after falling 7.1% and food & beverage outlays rose 2.1% (-0.4% y/y) following a 0.9% rise. Outlays on gasoline & other energy products fell 7.5% (+1.4% y/y) after increasing 9.0% in Q2.

Spending on services increased 3.6% (2.4% y/y) last quarter following a 1.0% gain. Housing & utilities outlays rose 3.6% (1.1% y/y) after rising 0.7% and health care purchases rose 3.0% (5.4% y/y) following a 2.5% increase. Restaurant & hotel accommodations rose 5.6% (2.4% y/y) after falling 0.9% in Q2 while outlays on recreation rose 1.3% (3.8% y/y), about as they did in Q2. Transportation services outlays gained 2.9% (0.3% y/y) following a 3.5% rise.

Business fixed investment eased 0.1% (+3.7% y/y) following a 7.4% jump in Q as spending on nonresidential structures rose 1.6% (13.1% y/y) after rising 16.1% and equipment investment fell 3.8% (-1.4% y/y) after rising 7.7%. Information processing investment fell 5.4% (-8.1% y/y), the fourth consecutive quarterly decline while industrial equipment outlays dropped 3.3% (-0.3% y/y) after falling 5.1%. Transportation equipment spending eased 1.3% (+13.9% y/y) after a 65.9% surge. Investment in intellectual property products rose 2.6% (3.8% y/y), about as it did in Q2.

Residential structures investment increased 3.9% last quarter (-7.8% y/y) after nine consecutive quarterly declines.

Government spending improved 4.6% (4.5% y/y) after a 3.3% rise. Federal government spending rose 6.1% (5.5% y/y) the strongest gain in three quarters while state & local government spending grew 3.7% (3.9% y/y) following a 4.7% Q2 rise.

The change in inventories contributed 1.32 percentage points to GDP growth last quarter after having no effect on Q2 growth. Trade deficit widening subtracted 0.08 percentage point from growth following a 0.04 point add in Q2. Exports rose 6.2% (-0.2% y/y) following a 9.3% decline while imports rose 5.7% (-1.4% y/y) after a 7.6% Q2 decline.

Price inflation accelerated last quarter. The GDP price index rose 3.5% (3.2% y/y), double the Q2 gain. A 2.6% rise had been expected. It fully reversed the prior quarter’s slowdown. The PCE price index increased 2.9% (3.4% y/y) after a 2.5% gain. The PCE price index excluding food and energy prices rose 2.4% (3.9% y/y) following a 3.7% Q2 rise. The PCE goods price index rose 0.8% (0.5% y/y) and services prices rose 4.0% (5.0% y/y). The services price index less housing rose 3.6% (4.5% y/y), about the same as in Q2. The business fixed investment price index rose 1.0% (2.7% y/y) following a 0.2% rise. The residential investment price index increased 5.2% (1.6% y/y) after a two quarterly declines. The government spending price index rose 4.5% (2.0% y/y) after falling 1.1% in the second quarter.

The GDP data can be found in Haver’s USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in AS1REPNA.