US Q3 GDP Revised Higher To 3.2%, Stronger Growth For Consumer Spending

US third-quarter GDP growth was revised higher to 3.2% in the second release from the preliminary estimate of 2.9% and this was also above consensus expectations of an increase to 3.0%.

There was upward revision to the personal consumption expenditure (PCE) estimate, which was partially offset by a downward revision to non-residential fixed investment and inventories.

PCE was revised up to an annual rate of 2.8% for the quarter from the first estimate of 2.1% with solid increases across goods and services, although there was a slight contraction in purchases of non-durable goods.

Overall investment increased 2.1% for the quarter from the original estimate of 3.1%. Capital spending was bolstered by strength in non-residential structures, although there will be disappointment that spending on equipment declined for the fourth successive quarter with a significant downward revision to the first estimate. There was a slower estimated decline in residential investment at 4.4% from the original 6.2%.

Net exports made a positive contribution for the quarter, while government spending rose only marginally by 0.2% from the 0.5% first estimate as local government spending contracted at a faster pace for the quarter. Inventories made a positive contribution for the first time since the first quarter of 2015.

There was a downward revision to the GDP price index to 1.4% from the first estimate of 1.5%, which will slightly dampen inflation expectations.

There will be no change to expectations of a December rate hike and there is the potential for slightly greater optimism surrounding 2017, although the overall impact should be limited.

USD/JPY strengthened after the data with a break above 113.00 to 113.25, but the dollar was unable to extend gains against the Euro with EUR/USD at 1.0585. Treasuries came under pressure with 10-year futures down over 10 ticks with the yield near 2.35% as equity futures were little changed.

Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.