Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  Real GDP was Revised to a 2.1% Annual Growth Rate in Q3
Posted Under: Data Watch • GDP

 

Implications: Real GDP grew at a 2.1% annual rate in Q3, beating the original estimate and the consensus expected 1.9% pace.  Inventories were revised higher, as was business investment in structures (commercial construction).  We like to follow "core" real GDP, which excludes inventories, government purchases, and international trade.  Inventories and government purchases are not representative of long-term growth, while the way trade is counted does a bad job of demonstrating that rising imports signal more purchasing power.  Core GDP grew at a 2.1% annual rate in Q3, is up 2.2% from a year ago, and is up at a 3.0% annual rate in the past two years.  Nominal GDP growth (real growth plus inflation) was revised to 3.8% annual rate in Q3 from a prior estimate of 3.5%.  Nominal GDP is up 3.8% in the past year and up at a 4.8% annual rate in the past two years.  All of these figures are well above where the Federal Reserve has set short-term interest rates, signaling that monetary policy is not tight and not an impediment to economic growth.  Also in today's GDP report was our first glimpse at economy-wide corporate profits in the third quarter. Profits rose 0.2% in Q3 but were down 0.8% versus a year ago. The increase was driven by profits from domestic non-financial firms as well as from the rest of the world, while profits at domestic financial firms were down.  Included in these numbers was a $6 billion reduction from legal settlements with Facebook and Google.  Both after-tax profits and corporate cash flow with an adjustment for inventory valuation, which is a measure of the funds companies have available to invest, hit all-time record highs. Plugging economy-wide profits into our capitalized profits models suggest that, even at higher interest rates stocks are still relatively cheap.

Click here  for PDF version

Posted on Wednesday, November 27, 2019 @ 11:49 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2020 All rights reserved.