Weak GDP Headline Masks Surprisingly Solid Details
Among the important details: Inventories subtracted 1.4 percent from GDP; so, excluding inventories, GDP growth was close to 3 percent. One of our favorite measures, private domestic demand, grew a respectable 3.2 percent (see chart). This relatively strong domestic growth suggests U.S. economic growth is still set to lead the global economy.
On the inflation front, price increases remain tame with PCE (personal consumption expenditures) price index up 1.2 percent, while the core PCE price index was up 1.3 percent.
All in all, a surprisingly solid mix of details despite the weak headline.
Today’s first release of third quarter GDP shows real GDP grew just 1.5 percent. However, the details of the report suggest a more positive tone.