U.S. GDP Growth Revised Up in Q3; Profits Strengthen & Price Index Stays Firm

Real GDP growth in the third quarter was lifted to 5.2% (SAAR) from 4.9% reported last month. The gain followed a 2.1% Q2 increase and a 2.2% Q1 rise. It remained the strongest increase since the fourth quarter of 2021 and raised y/y growth to 3.0%, the firmest since the beginning of last year. The Action Economics Forecast Survey expected a 5.0% gain.

Corporate profits after tax increased 4.3% (0.5% y/y) last quarter after rising 0.8% in Q2 and 1.1% in Q1. Profits were falling in the second half of last year. Before-tax earnings rose 3.3% (-0.7% y/y) after a 0.2% gain. Taxes eased 0.3% (+4.4% y/y) after a 1.1% fall in Q2. Net dividends fell 0.9% both q/q and y/y and reversed the Q2 rise.

Growth in real final sales to domestic purchasers was raised to 3.7% (2.5% y/y) from 3.5% following a 2.0% rise in Q2. Personal consumption expenditures growth was lessened to 3.6% (2.3% y/y) from 4.0% following a 0.8% Q2 rise and added 2.4 percentage points to Q3 growth. Durable goods spending growth of 6.8% (4.7% y/y) was reduced from 7.6%, following a 0.1% slip. Motor vehicle expenditures fell 0.9% (+5.6% y/y), revised from a 1.3% gain, after falling 9.1%. Furniture & appliance buying rose 5.6% (1.5% y/y), revised from 7.1%, after holding steady in Q2 while recreational goods & vehicle purchases surged 16.8% (8.3% y/y), revised from 15.8%, after strengthening 11.2% in Q2.

Nondurable goods outlays improved a little-revised 3.5% (1.3% y/y) after a 0.9% Q2 improvement. Apparel outlays rose 6.8% (0.3% y/y) after falling 7.1% and food & beverage outlays rose 2.0% (-0.4% y/y) following a 0.9% rise. Outlays on gasoline & other energy products fell a lessened 4.9% (+2.1% y/y) after increasing 9.0% in Q2.

Spending on services increased 3.0% (2.2% y/y) last quarter, revised from 3.6%, following a 1.0% gain. Housing & utilities outlays rose a little-revised 3.1% (1.0% y/y) after a 0.7% improvement and health care purchases rose a minimally revised 2.9% (5.4% y/y) following a 2.5% increase. Restaurant & hotel accommodations rose 7.0% (2.7% y/y), revised from 5.6%, after falling 0.9% in Q2, while growth in recreation outlays rose a little-changed 1.4% (3.8% y/y), as they did in Q2. Transportation services outlays increased 3.2% (0.3% y/y), revised from 2.9%, following a 3.5% rise.

Business fixed investment increased 1.3% (4.0% y/y), revised from a 0.1% dip, following a 7.4% jump in Q as spending on nonresidential structures rose 6.9% (14.6% y/y), revised from 1.6%, after rising 16.1% in Q2. Equipment investment fell a little-changed 3.5% (-1.4% y/y) after rising 7.7%. Information processing investment fell a minimally changed 5.2% (-8.1% y/y), the fourth consecutive quarterly decline, while industrial equipment outlays fell 5.4% (-0.9% y/y), revised from -3.3% after falling 5.1% in Q2. Transportation equipment spending eased 0.6% (+14.1% y/y), revised from -1.3%, after a 65.9% surge in Q2. Investment in intellectual property products rose a little-changed 2.8% (3.8% y/y), about as it did in Q2.

Residential structures investment increased 6.2% (-7.3% y/y), revised from a 3.9%, after nine consecutive quarterly declines.

Government spending increased 5.5% (4.7% y/y), revised from 4.6%, after a 3.3% rise. Federal government spending growth was increased to 7.0% (5.7% y/y) from 6.1% and remained the strongest gain in three quarters. State & local government spending grew 4.6% (4.2% y/y), revised from 3.7%, following a 4.7% Q2 rise.

The change in inventories contributed 1.40 percentage points to GDP growth, revised from 1.32 percentage points, after having no effect on Q2 growth. Trade deficit widening subtracted a little-changed 0.04 percentage point from growth, following a 0.04 point addition in Q2. Exports rose 6.0% (-0.2% y/y) following a 9.3% decline, while imports rose 5.2% (-1.5% y/y) after a 7.6% Q2 decline.

The GDP price index accelerated to 3.6% (3.3% y/y) in Q3, revised little from 3.5%, after a 1.7% Q2 gain. A 3.5% rise had been expected. The PCE price index increased a minimally revised 2.8% (3.4% y/y) after a 2.5% gain. The PCE price index excluding food and energy prices rose 2.3% (3.9% y/y) following a 3.7% Q2 rise. The PCE goods price index rose 0.9% (0.5% y/y) and services prices rose 3.8% (4.9% y/y), revised from 4.0%. The services price index less housing rose 3.4% (4.4% y/y), revised from 3.6%, about the same as in Q2. The business fixed investment price index rose a minimally changed 0.9% following a 0.2% rise. The residential investment price index increased an unrevised 5.2% (1.6% y/y) after two quarterly declines. The government spending price index rose 5.1% (2.2% y/y), revised from 4.5% 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.