U.S. GDP Growth Lessened in Q3; Profits & Price Index Remain Firm

Real GDP growth in the third quarter was revised lower to 4.9% (SAAR) from 5.2% reported last month. The gain followed a 2.1% Q2 increase and a 2.2% Q1 rise. It remained the strongest increase since the fourth quarter of 2021 and left y/y growth at 2.9%, the firmest since the beginning of last year. The Action Economics Forecast Survey expected no change from growth reported last month.

Corporate profits after tax increased 4.0% last quarter (0.1% y/y), revised from 4.3%, after rising 0.8% in Q2 and 1.1% in Q1. Profits fell in the second half of last year. Before-tax earnings rose a little-revised 3.4% (-0.6% y/y) after a 0.2% gain. Taxes rose 2.2% (7.0% y/y), revised from a 0.3% decline, after a 1.1% fall in Q2. Net dividends fell a marginally revised 1.0% (-1.0% y/y) and reversed the Q2 rise.

Growth in real final sales to domestic purchasers was lessened to 3.5% (2.5% y/y) from 3.7% following a 2.0% rise in Q2. Personal consumption expenditures growth was shaved to 3.1% (2.2% y/y) from 3.6% following a 0.8% Q2 rise, adding 2.1 percentage points to Q3 growth. Durable goods spending growth of 6.7% (4.7% y/y) was little-changed following a 0.3% slip. Motor vehicle expenditures fell 1.2% (+5.5% y/y), revised from -0.9%, after falling 9.1%. Furniture & appliance buying rose a marginally changed 5.5% (1.5% y/y), after holding steady in Q2 while recreational goods & vehicle purchases surged a little-changed 16.9% (8.4% y/y) after strengthening 11.2% in Q2.

Nondurable goods outlays improved 3.9% (1.4% y/y), revised from 3.5%, after a 0.9% Q2 improvement. Apparel outlays rose a downwardly revised 6.2% (0.2% y/y) after falling 7.1%, and food & beverage outlays rose a marginally changed 1.9% (-0.4% y/y) following a 0.9% gain. Outlays on gasoline & other energy products fell a lessened 1.0% (+3.1% y/y) after increasing 9.0% in Q2.

Spending on services increased 2.2% (2.0% y/y), revised from 3.0%, last quarter following a 1.0% gain. Transportation services outlays growth was reduced to 0.9% (-0.2% y/y) from 3.2% (0.3% y/y) reported last month, following a 3.5% rise. Housing & utilities outlays rose a little-revised 3.0% (1.0% y/y) after a 0.7% improvement. Health care purchases rose a minimally revised 2.7% (5.4% y/y) following a 2.5% increase. Restaurant & hotel accommodations rose a little changed 7.1% (2.7% y/y) after falling 0.9% in Q2, while growth in recreation outlays rose an increased 2.3% (4.1% y/y) after gaining 1.4% in Q2.

Business fixed investment increased a little-changed 1.5% (4.1% y/y) last quarter following a 7.4% jump in Q as spending on nonresidential structures rose 11.2% (15.7% y/y), revised from 6.9%, after rising 16.1% in Q2. Equipment investment fell 4.4% (-1.6% y/y), revised from -3.5%, after rising 7.7%. Information processing investment fell an increased 7.0% (-8.5% y/y), the fourth consecutive quarterly decline, while industrial equipment outlays fell an unrevised 5.4% (-0.9% y/y) after falling 5.1% in Q2. Transportation equipment spending weakened 1.7% (+13.8% y/y), revised from -0.6%, after a 65.9% surge in Q2. Investment in intellectual property products rose 1.8% (3.6% y/y), revised from 2.8%, after a 2.7% rise.

Residential structures investment increased 6.7% (-7.2% y/y), revised from 6.2%, after nine consecutive quarterly declines.

Government spending increased 5.8% (4.8% y/y), revised from 4.6%, after a 3.3% rise. Federal government spending growth of 7.1% (5.7% y/y) was marginally changed and remained the strongest gain in three quarters. State & local government spending grew 5.0% (4.3% y/y), revised from 4.6%, following a 4.7% Q2 rise.

The change in inventories contributed 1.27 percentage point to GDP growth, revised from 1.40 percentage points, after having no effect on Q2 growth. Trade deficit narrowing added a little-changed 0.03 percentage point to GDP- growth, following a 0.04 point addition in Q2. Exports rose a lessened 5.4% (-0.4% y/y) following a 9.3% decline, while imports rose a reduced 4.2% (-1.7% y/y) after a 7.6% Q2 decline.

The GDP price index decelerated to 3.3% (3.2% y/y), revised from 3.6%, after a 1.7% Q2 gain. A 3.6% rise had been expected. The PCE price index increased a lessened 2.6% (3.3% y/y) revised from 2.8%, after a 2.5% gain. The PCE price index excluding food and energy prices rose 2.0% (3.8% y/y), revised from 2.3%, following a 3.7% Q2 rise. The PCE goods price index rose an unrevised 0.9% (0.5% y/y) and services prices rose 3.5% (4.8% y/y), revised from 4.0%. The services price index less housing rose 2.9% (4.3% y/y), revised from 3.4%, after a 3.5% rise.

The business fixed investment price index rose an unchanged 0.9% (2.6% y/y) following a 0.2% rise. The residential investment price index increased 4.8% (1.5% y/y), revised from 5.2%, after two quarterly declines. The government spending price index rose an unchanged 5.1% (2.2% y/y) after falling 1.1% in the second quarter.

The GDP data can be found in Haver’s USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in AS1REPNA.