US Q3 GDP accelerates even as final demand slows

Economic growth in the States accelerated more than expected in the third quarter as foreign trade and inventory accumulation made up for a slowdown in households´ spending and in business investment.

Gross domestic product expanded at a quarterly annualised pace of 2.9%, the Department of Commerce said, ahead of the 2.6% forecast by economists and growth of 1.4% in the second quarter.

Nevertheless, the final demand component of GDP, which strips out foreign trade and the inventory cycle, slowed from a 2.4% clip to 1.4%.

Household spending eased back to a 2.1% pace (consensus: 2.6%) following a jump to 4.3% over the prior three months, which was the fastest since late 2014.

Consumption added 1.47 percentage points to GDP in the quarter.

The pace of inventory accumulation shifted gears, with stockpiles rising by $12.6bn after having shrunk at a $9.5bn clip over the previous three months. Nevertheless, that was sufficient to add 0.61 percentage points to GDP.

It marked the first inventory build in six quarters.

Business fixed investment expanded by 1.2%, contributing 0.12 percentage points to GDP.

However, while so-called investment in structures, such as in office buildings and factories, surged 5.4% - the most in two years - that in equipment declined by 2.7% after a drop of 2.9% in the previous three months.

Homebuilding on the other hand fell 6.2%, subtracting 0.24 percentage points from the rate of expansion.

Government spending added 0.09 percentage points to growth.

Net exports, the final component of aggregate demand, accounted for 0.83 percentage points of the quarterly rate of GDP growth.

The core price deflator for personal consumption expenditures advanced at a 1.7% pace, down from the 1.8% seen in the previous quarter.

Headline PCE also fell back, from 2.0% to 1.4%.

The price index for gross domestic purchases advanced by 1.6%, down from 2.1% in the prior quarter.

Rob Martin at Barclays Research labeled the underlying details of the report "solid", although the softness in capital and consumer goods imports "remain a source of concern".

"The main miss relative to our expectations came from private consumption. Consumption increased 2.1%, against our expectation of a 2.5% increase. As usual, the main difference between our expectation and the first release is in services consumption; neither we nor the BEA receive firm data on services consumption this soon after the quarter. Offsetting our miss on consumption, both inventories and net trade made solid positive contributions to growth, with each contributing somewhat more than we had expected," Martin said.

The yield on the benchmark 10-year US Treasury note was one basis point lower at 1.85%.