- The advance estimate of US third-quarter 2013 gross domestic product (GDP) growth was 2.8%, which was above both the 2.5% increase in the second quarter and market expectations for a smaller 2.0% gain.
- Consumer spending rose a slightly smaller than expected 1.5% (market expectations had been for a 1.6% gain); however, offset was provided by strong construction spending (both residential and non-residential) as well as a larger than expected build in inventories.
- The pace of GDP growth in the third quarter of 2013 was stronger than expected and up from the 2.5% increase in the second quarter. Growth during the two quarters combined remains respectable, particularly given that it occurred despite sizeable fiscal contraction implemented this year. The 16-day shutdown of the federal government and uncertainty surrounding the contentious debt ceiling debate likely crimped activity in October. As well, the stronger than expected addition from inventories in the third quarter suggests some potentially early downside risk to our forecast that GDP rose at a 2.2% rate in the fourth quarter. The resumption of budget talks early next year will likely contribute to another bout of policy uncertainty. With that said, we continue to expect that the pace of fiscal consolidation will ease in 2014 relative to 2013, which, along with underlying stability in private-sector activity, should allow GDP growth to strengthen modestly next year.
- In a separate report, initial jobless claims dipped 9,000 to 336,000 for the week ending November 2, 2013, which was just slightly above market expectations for a 335,000 reading. The drop marked the fourth consecutive weekly decline after the processing of a backlog of claims created by computer glitches in some states caused the measure to spike higher early in October. The four-week moving average of initial claims declined for the first time in five weeks, by slipping to 348,250 from 357,500 in the previous week.
The advance estimate of US third-quarter 2013 annualized GDP growth was 2.8%, unexpectedly above the 2.5% increase in the second quarter. Market expectations had been for a 2.0% increase in the third quarter. The unexpected pick-up in overall GDP growth was despite moderation in the pace of growth in consumer spending to 1.5% from 1.8% in the second quarter. As well, investment in equipment declined 3.7%, which was its first quarterly decline since the third quarter of 2012. Offset was provided by sizeable gains in residential investment (14.6%), investment in non-residential structures (12.3%), and a larger than expected build in inventories that accounted for 0.8 percentage points of overall GDP growth in the quarter. Government spending inched up 0.4% despite continued declines in spending by the federal government (-1.7%) with offset provided by a 1.5% rise in spending at the state and local level. Net trade provided a broadly expected 0.3 percentage points of support to growth in the third quarter as a 4.6% increase in exports outpaced a 1.8% rise in imports.
The key price measure in the report, the core personal consumption expenditure (PCE) deflator, rose at a 1.4% annualized pace in the third quarter of 2013, which was up from a 0.6% gain in the second quarter.
The pace of growth in the third quarter was stronger than expected and up from the 2.5% increase in the second quarter. Growth during the two quarters combined remains respectable, particularly given that it occurred despite sizeable fiscal contraction implemented this year. The 16-day shutdown of the federal government and uncertainty surrounding the contentious debt ceiling debate likely crimped activity in October. As well, the stronger than expected addition from inventories in the third quarter suggests some potentially early downside risk to our forecast that GDP rose 2.2% in the fourth quarter of 2013. The resumption of budget talks early next year will likely contribute to another bout of policy uncertainty. With that said, we continue to expect the pace of fiscal consolidation to ease in 2014 relative to 2013, which, along with underlying stability in private sector activity, should allow GDP growth to strengthen modestly during 2014.
RBC