·
U.S. real GDP growth last quarter was revised down to 2.0% (AR). The
estimate had started at 1.6% then was raised to 2.2% last month and
compared to Consensus expectations for no change at 2.2%. The rise in
GDP last quarter was the second slowest quarterly growth rate since 1Q
2003.
· Expectations for growth this quarter call for further slowdown then improvement to 3.0% GDP growth next year. Economic forecasts from Macroeconomic Advisors are available in the Haver DLX database MA4CAST.
· Growth in corporate
profitability was revised slightly lower to still-firm 3.9% (30.6% y/y)
from the 4.2% gain estimated initially. (The comparison versus last year
is exaggerated by the losses suffered due to Hurricane Katrina.) The
downward revision was due to a lowered figure for profits earned by US
financial corporations which fell 1.9% (+60.4% y/y) and a deepened
decline in profits earned by foreign entities which fell 2.2% (+5.0%
y/y). U.S. nonfinancial corporate profitability was revised up slightly
to 8.7% (26.4% y/y).
· Less inventory accumulation contributed to the downward GDP revision for 3Q and it added 0.1 percentage points to GDP rather than the 0.2 point add estimated last month.
· Overall growth in final sales to domestic purchasers was reduced slightly to 2.0%. Growth in personal consumption was reduced slightly to 2.8% (2.7% y/y) and nonresidential fixed investment growth was held steady at 10.0% (8.3% y/y).
· Residential investment was
even weaker than indicated earlier and the 3Q estimate was revised
slightly down to -18.6% (AR, -8.1% y/y). It was the fourth consecutive
decline, the largest since 1991 and pulled 1.2 percentage points from 3Q
GDP growth. That subtraction was the largest by housing since 1981.
· Deterioration in the net export deficit was left unchanged at a 0.2 percentage point subtraction from GDP growth. Export growth was upwardly revised slightly to 6.8% (9.1% y/y) and import growth also was revised up slightly to 5.6% (7.2% y/y).
· The GDP chain price index was revised up slightly to 1.9%, its weakest quarterly advance in over three years. The PCE chain price index grew an unrevised 2.4% (2.8% y/y). Less food & energy the PCE chain price index grew 2.3% (2.4% y/y).
· Milton Freidman on Inflation from the Federal Reserve Bank of St. Louis is available here.