U.S. business spending remains mixed in Q3, signals a favorable growth profile

Business spending in the United States remained mixed during the third quarter of this year, while corporate profits returned to positive growth during the period, indicating a favorable growth profile of the economy, at least in the near-term.

Spending on non-residential structures, which include oil and gas wells, was revised sharply higher to show it increasing at its fastest pace since the first quarter of 2014.

However, business spending on equipment fell at a steeper rate than previously reported, declining for a fourth straight quarter. With after-tax corporate profits rising at a 7.6 percent pace last quarter there is scope for business investment to rebound. Corporate profits declined at a 1.9 percent rate in the second quarter.

Further, businesses accumulated inventories at a USD7.6 billion rate in the last quarter, almost half of the USD12.6 billion pace reported last month. That means inventory accumulation contributed 0.49 percentage point to GDP growth and not the 0.61 percentage point reported last month.

"The return to positive growth in corporate profits at least satisfies what is probably a necessary, but not sufficient, condition for a rebound in business fixed investment," Reuters reported, citing,  Andrew Hollenhorst, Economist, Citigroup in New York.

In the second estimate of Q3 GDP, US growth was revised three-tenths higher to 3.2 percent q/q saar, data released by the Commerce Department showed Tuesday, helped by personal consumption expenditure which was estimated to have grown 2.8 percent, from 2.1 percent in the advance estimate.

The upbeat data, along with a recovering labor market and rising rates of inflation, all create a favorable environment for the Fed to raise its benchmark interest rate, after having done so at the last December for the first time in nearly a decade.

Meanwhile, the dollar index remained bullish at 101.12, up 0.19 percent, while at 5:00GMT, the FxWirePro's Hourly Dollar Strength Index remained highly bearish at -115.38 (below -75 indicates bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex