The U.S. Bureau of Economic Analysis published its first estimate of third-quarter economic growth - 3.4% annualized. The forecast was 3.2%. The report came out on October 29 at 15:30 Moscow time.
BEA is the U.S. government agency that calculates GDP. The same report also publishes price data. The inflation part turned out noticeably softer than forecast.
For a trader this is a double signal. Strong growth usually pushes the dollar up, while soft prices push it down. That is why the market reaction in such minutes is choppy.
What did the numbers show?
- 3.4% - GDP growth versus a forecast of 3.2%
- 2.2% from 1.5% - how the second quarter was revised upward
- 3.8% - consumer spending added, same as the quarter before
- 3.3% - the preliminary Atlanta Fed GDPNow estimate
Annualized - this is the rate that would result if the quarterly dynamics persisted all year.
What drove the growth?
- Investment: +3.27 percentage points. The main contributors were inventory buildup among wholesalers and manufacturers plus purchases of computers and equipment.
- Consumer: +2.52 p.p. Healthcare, restaurants and hotels led. In goods - prescription drugs.
- Government spending: +0.90 p.p.
The main drag is foreign trade. The fall in exports took away 0.68 p.p., mainly due to oil and petroleum products. The rise in imports took away another 2.64 p.p.
The largest import category - capital goods excluding autos. That is, purchases for artificial intelligence.
Where is the weak spot in the report?
Final sales grew only 1.7% versus a forecast of 2.0%. The quarter before it was 2.8%.
Final sales are GDP excluding the change in inventories.
The main point: part of the pretty headline was made by inventories in warehouses, not by live demand.
What about inflation?
Prices inside the report cooled. The GDP deflator came in at 2.2% versus the expected 3.5%, and it was 6.1%.
- 2.1% - the headline PCE price index versus a forecast of 2.6% (was 5.0%)
- 2.5% - core PCE versus a forecast of 2.4%
PCE is the personal consumption expenditures price index, and it is the one the Fed watches.
What happens next?
A strong headline usually supports the dollar and bond yields. But soft prices and weak final sales smooth out that effect.
The next rate showdown is the December Fed meeting. It is convenient to keep the date in the economic calendar.
Were you in a position at 15:30?
A report like this cannot be read from the first line. The headline is strong, but final sales and prices say the opposite. The dollar swings both ways while the market figures it out. You can trade this window, but prop firms have different rules for it: somewhere a trade in the minute of the statistics release is standard, somewhere it is an account removal with no discussion. Plus the daily loss limit is calculated differently by everyone. Sort this out across the programs before the next data block, not after.