Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  Real GDP Growth in Q3 was Unrevised at a 2.1% Annual Rate
Posted Under: Data Watch • GDP
Supporting Image for Blog Post

 

Implications: Today's final GDP report for the third quarter showed the same moderate 2.1% annualized pace of growth that was estimated last month, but with a small decline now in corporate profits compared to the small increase in prior readings.  The mix of revisions from the previous estimate were more positive.  Consumer spending on services and commercial construction were revised slightly higher, while inventories were revised lower, which leaves more room for inventory growth in future quarters.  "Core" real GDP, which strips out inventories, net exports, and government purchases, rose at a 2.3% annual rate in the third quarter and is up at a 3.0% annualized rate in the past two years.  At present, we're estimating that real GDP grew at around a 3.0% annual rate in Q4, although we get plenty of fresh data over the next month before the government releases its initial report on Q4.  Today's reading on growth, an unemployment rate at 3.5%, and inflation readings hovering around 2% all show no need for more rate cuts.  Nominal GDP growth – real GDP growth plus inflation – is up 3.8% from a year ago, and up 4.8% annualized in the past two years, much too high for short-term interest rates below 2.0%.  In addition to the solid growth rate in the economy, today's report also provided a second look at economy-wide corporate profits.  But unlike the GDP reading, corporate profits were revised lower.  Profits declined 0.2% in Q3 compared to the previously estimated increase of 0.2%.  Profits are down 1.2% in the past year.  However, on an after-tax basis profits rose 0.6% in Q3 and are near the all-time high set a year ago.  Plugging these data into our capitalized profits model suggests that, even with 10-year Treasury rates at 2.5% (compared to sub-2.0% rates today), stocks are still cheap. Economic growth in Q3 was respectable, and Q4 looks better.   

Click here  for PDF version 

Posted on Friday, December 20, 2019 @ 10:06 AM • Post Link 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 professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.