Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  Real GDP Revised Up to a 3.3% Annual Growth Rate in Q3
Posted Under: Data Watch • GDP • Government • Markets • Fed Reserve • Stocks
Supporting Image for Blog Post

 
Implications:  Real GDP growth in the third quarter was revised up to a 3.3% annual rate, the fastest pace in three years.  The increase from the prior estimate of 3.0% was largely due to a pickup in business investment.  Equipment spending grew at a 10.4% annual rate in Q3, the fastest pace since 2014.  Every major category of equipment spending showed healthy growth in Q3.  Inventories and government spending were also revised higher with today's estimate.  We like to follow "core" real GDP, which excludes inventories, government purchases, and international trade. Inventories and government don't generate long-term growth, while the way trade is counted does a bad job of showing that rising imports signal strong spending.  Core GDP grew at a 2.3% annual rate in Q3 versus a prior report of 2.2% and is up at a respectable 2.5% annual rate in the past two years.  Nominal GDP growth (real growth plus inflation) was revised to 5.5% annual rate in Q3 from a prior estimate of 5.2%.  Nominal GDP is up 4.2% in the past year and up at a 3.5% annual rate in the past two years.  All of these figures suggest the economy can sustain higher short-term interest rates, which is why we think the Fed will raise rates in December followed by three or four hikes in 2018.  Also in today's GDP report was our first glimpse at economy-wide corporate profits in the third quarter.  Profits rose 4.3% in Q3 and are up 5.4% versus a year ago.  Plugging economy-wide profits into our capitalized profits models suggest that, even at higher interest rates (such as a 10-year Treasury yield of 3.5%), stocks are still relatively cheap.  In other recent news, the Richmond Fed index, a measure of mid-Atlantic manufacturing sentiment, soared to a record high of 30 in November, a big increase from an already healthy 12 in October.  On the housing front, prices keep rising.  The national Case-Shiller index increased 0.7% in September and is up 6.2% from a year ago.  That outstrips the 5.1% gain in the year ending September 2016.  The FHFA index, which measures prices for home financed with conforming loans, rose 0.3% in September and is up 6.4% from a year ago, close to the 6.5% gain in the year ending September 2016.  Pending home sales, which are contracts on existing homes, rose 3.5% in October after a 0.4% decline in September.  These figures suggest existing home sales, which are counted at closing, will be up slightly in November.

Click here for a PDF version
Posted on Wednesday, November 29, 2017 @ 10:16 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
 PREVIOUS POSTS
New Single-Family Home Sales Increased 6.2% in October
Consumer Fundamentals Are Strong
M2 and C&I Loan Growth
New Orders for Durable Goods Declined 1.2% in October
Existing Home Sales Rose 2.0% in October
The Economy is Accelerating
M2 and C&I Loan Growth
Tasty Tax Reform
Housing Starts Increased 13.7% in October
Industrial Production Increased 0.9% in October
Archive
Skip Navigation Links.
Expand 20242024
Expand 20232023
Expand 20222022
Expand 20212021
Expand 20202020
Expand 20192019
Expand 20182018
Expand 20172017
Expand 20162016
Expand 20152015
Expand 20142014
Expand 20132013
Expand 20122012
Expand 20112011
Expand 20102010

Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.