- Final Q3 GDP was +4.4%
- Consumer spending (PCE):+2.4%
- GDP final sales (excluding inventories) +1.2% vs +2.6% expected
- GDP price index (GDP deflator): vs +2.9% expected
- Core PCE (excluding food & energy): +2.7% vs +2.6% expected
- Business investment (nonresidential fixed investment):
- 2025 annual GDP at about 2.23%
Contributions to GDP in percentage points:
- Government -0.9 vs +0.38 prior
- Net exports +0.08 vs +1.62 prior
- Inventories +0.21 vs -0.12 prior
- Fixed investment +0.45 vs +0.15 prior
- Services +1.59 vs +1.7 prior
- Goods -0.01 vs +0.64 prior
USD/JPY was trading at 155.17 just before the release and 2-year yields were trading at 3.46%. The Fed funds futures market was pricing in 58 bps in easing through year end.
From the release:
The BEA estimates that this reduction in services provided by the federal government subtracted
about 1.0 percentage point from real GDP growth in the fourth quarter
Of course, economists knew there was a shutdown so that was at least somewhat factored in.
Note the inflation numbers here but also note the December PCE report was released at the same time so we two readings on inflation.
Trump was out just before this release saying that the government shutdown cost ‘at least’ 2 points in GDP. That was a hint he’d seen the number beforehand and that it wasn’t what he wanted.
Yesterday, the Atlanta Fed GDPNow tracker fell to 3.0% after starting the week at 3.7%. The biggest part of the downgrade was yesterday’s trade balance number and I would suspect that most economists didn’t have that in their model. So in light of that and Trump’s comments, I see risks to the downside. Moreover, four major economic forecast firms — Morgan Stanley, Goldman Sachs, Wells Fargo and Barclays — all have had in the 1.5-1.7% range so maybe this wasn’t such a big surprise.
This article was written by Adam Button at investinglive.com.
