US DATA
Q3 GDP growth was unexpectedly revised up in the third and final reading, to 3.1% Q/Q annualized from 2.8% prior, and an acceleration from 3.0% prior - representing the best quarterly growth since Q4 2023.
- The upward revisions were "solid", driven by domestic demand: growth in real final sales to domestic purchasers came in at 3.7%, up 0.2pp from the 2nd reading and 2.8% in Q2.
- Real final sales to private domestic purchasers grew by 3.4%, up from 2.7% in Q2. According to Fed Chair Powell at December's press conference in reference to this metric, which "we think is the best indicator" of growth: "private demand is looking to come in around 3% this year. This is a really good number" (it grew 3.1% on a Y/Y basis in Q3).
- This was encapsulated an upgrade to personal consumption expenditures (up 3.7% vs 3.5% in the prior reading), contributing 2.5pp to overall growth.
- The only noticeable downside in the report is that real Gross Domestic Income was nudged down by 0.1pp to 2.1% - but even so, the average of real GDP and real GDI ticked up by 0.1pp to 2.6%. So while GDI will still be seen as a sign of softer growth than the impressive GDP numbers, they're clearly not recessionary.
- Early estimates for Q4 show similar results to Q3 so far, with the Atlanta Fed's nowcast at around 3%.
- The upgrade to Q3 growth suggests upside risks to the Fed's new SEP forecast for Q4 2024 (2.5%, Y/Y upgraded from 2.0% in the prior edition).
- A note on inflation: core PCE was revised up from 2.146% (just rounding to 2.1%) to 2.193% (2.2% rounded) in the final reading - casting a slightly hawkish tone to the report.
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