There was good news for the domestic economic narrative in the second estimate for third quarter GDP, although it will be summarily written off as a function of inventory buildup and overshadowed by an expected deceleration in the fourth quarter.
The US economy grew an annualized 2.1% during Q3, better than the 1.9% reported in the first read late last month. That’s near the top end of the range from 69 economists. The Q2 print was revised to 2%.
This comes as something of a relief, at least in terms of optics. The 1.9% print was tied for the second-lowest in 15 quarters, even as it was well ahead of estimates.
Personal consumption was unrevised, rising 2.9%, still representing a decent curtain call from the outsized 4.6% logged in Q2, and underscoring the extent to which the economy is being propped up by the consumer as business spending lags amid pervasive C-suite uncertainty.
The October retail sales report didn’t do much to bolster confidence headed into the holiday shopping season. Even as the headline matched estimates, the ex-autos print was half of expectations.
The second estimate for Q3 GDP showed nonresidential fixed investment fell 2.7%, a bit less than the initially reported 3% drop, but still the biggest decline since Q4 2015.
On the bright side for business spending, non-defense capital goods orders ex-aircraft jumped 1.2% last month, the most since January, while shipments ex-aircraft rose 0.8% for the month. Analysts were looking for declines on both.
Meanwhile, jobless claims fell by the most since May.
All in all, the first of Wednesday’s data deluge suggests Trump’s MAGA economy is doing a shade better than expected, and the White House will take whatever it can get right now. As far as markets are concerned, this will likely bolster the narrative that the worst is behind us in terms of the slowdown.
At the same time, it could harden the Fed’s resolve when it comes to sticking with the “good place” characterization of monetary policy following three consecutive rate cuts which the committee continues to insist were a “mid-cycle adjustment”, not the start of a prolonged (let alone aggressive) easing cycle.