Q3 GDP Revised Down Sharply To 2%

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Headline: A second reading of  Q3 GDP was shaved down dramatically to 2% on a seasonally adjusted annual basis. This comes from a prior reading of 2.5% GDP growth.The GDP price index however held steady at 2.5%. Meanwhile, personal consumption was up 2.3%.

U.S. futures are moderately lower ahead of the market open.

Expectations: Markets are expecting preliminary (second) estimate of Q3 GDP data to reflect 2.4% quarter-over-quarter change on a seasonally adjusted annual basis.

Analysis: After growing just 1.3% in the second quarter, the initial 2.5% Q3 GDP number had seemed optimistic. With the super committee failing to reach any consensus on $1.2 trillion in cuts in the federal deficit, analysts are expecting an increase in the likelihood of a double dip recession.

From the release:

“The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, increased.

…Final sales of computers added 0.22 percentage point to the third-quarter change in real GDP after adding 0.07 percentage point to the second-quarter change.  Motor vehicle output added 0.18 percentage point to the third-quarter change in real GDP after subtracting 0.10 percentage point from the second-quarter change.”

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