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Brian Wesbury
Chief Economist
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Bob Stein
Deputy Chief Economist
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 | Real GDP was revised up to a 2.5% annual growth rate in Q3 |
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Implications: The US economy is accelerating into the end of the year and corporate profits are now at a record high. Real GDP growth was revised up to a 2.5% annual rate in Q3 and the "mix" of growth was more favorable than previously estimated, with upward revisions to personal consumption, business investment, and net exports. Meanwhile, inventories were revised down, leaving more room for future growth. In the past two quarters, real GDP has grown at a tepid 2.1% annual rate. However, we believe this supposed "soft patch" is largely the result of difficulties the government is having with seasonally-adjusting imported oil prices. That's why the government says trade has been such a huge drag on real GDP growth in Q2/Q3. Excluding trade from the GDP numbers gives us the growth rate of domestic purchases, which are up at a strong 4.7% annual rate. If we're right on the oil price issue, look for a "pop" in the GDP growth rate in Q4, even over and above the actual acceleration in the economy. Today's GDP report also showed corporate profits hitting a record high, growing at an 11.5% annual rate in Q3. The gain in profits in Q3 was mostly powered by domestic financial companies, whose profits increased at a 46% rate. Profits from abroad fell slightly. Bottom-line: loose monetary policy has already gained traction. Nominal GDP is up 4.5% versus a year ago. We don't need quantitative easing.
Click here for the full report.
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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.
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