US Q3 GDP prints better than expected figures, solid domestic activity partially offsets weakness

The third estimate of Q3 GDP came in at 2.0% q/q saar, a touch stronger than forecast (1.8%) and consensus (1.9%) estimates. The main surprise came from fixed investment and inventories. Equipment spending was revised up to 9.9% from 9.5% and intellectual property investment was unchanged at -0.8% versus expectation for a 2.4% decline.

The change in private inventories at $85.5bn meant inventories are estimated to have subtracted 0.7pp from growth in the quarter against the expectation for an 0.8pp decline. Elsewhere, the details of the report matched the expectations. Growth in private consumption remained solid at 3.0% and residential investment was revised higher to 8.2% from 7.3% in the second estimate. Net trade was also revised to show a stronger drag of 0.3pp versus 0.2pp previously.

Altogether, the third estimate of Q3 GDP does little to change the picture of solid domestic activity offset by weakness abroad, as final sales to domestic purchasers (GDP less trade and inventories) rose 2.9% in the quarter.

"Soft global growth and the lagged effects of lower energy prices and a stronger dollar continue to weigh on trade and manufacturing, the latter of which we see as reflected in the slower pace of inventory accumulation as production is adjusted to meet the slower pace of sales. We look for this pattern of growth to be maintained in Q4", says Barclays.