MNI DATA ANALYSIS: US Q3 GDP Up 3.5%; GDP Price Index Up 1.7%>

--Core PCE Price Index +1.6% Vs +2.1% Q2; +2.0% Y/Y Vs +1.9% Y/Y Q2

By Kevin Kastner, Shikha Dave and Harrison Clarke

     WASHINGTON (MNI) - Third quarter GDP rose 3.5% in the advance 

estimate, higher than the 3.3% pace expected, reflecting smaller 

contributions from net exports and fixed investment compared with the 

previous quarter, data released Friday by the Bureau of Economic 

Analysis showed. 

     The BEA noted that it was not possible to estimate the impact of 

Hurricane Florence on third quarter GDP. 

     The core PCE price index rose 1.6% in the third quarter after a 

2.1% increase in the second quarter. On a year/year basis, third quarter 

core PCE prices were up 2.0% after a 1.9% year/year rise in the second 

quarter and are now in line with the Fed's threshold that the monthly 

data has been indicating. 

     The overall GDP price index was 1.7% in the third quarter, lower 

than the 1.9% rate expected, after a 3.0% pace of growth for the second 

quarter. 

--NET EXPORTS REVERSE

     The chained dollar net export gap widened sharply to $939.0 billion 

for the third quarter after narrowing to $841.0 billion in the second 

quarter. The net contribution of this category to overall GDP was the 

-1.78, the largest drag since the second quarter of 1985. Final sales to 

domestic purchasers rose 3.1% after a 4.0% rise in the previous quarter. 

     Nonresidential fixed investment rose by 0.8% in the third quarter, 

slowing from the 8.7% rise in the second quarter, due mostly to 

a drop in structures investment. Residential fixed investment was down 

4.0% in the third quarter after a 1.3% decline in the second quarter. 

     However, inventories were up $76.3 billion in the third quarter 

after a $36.8 billion decline in the second quarter. When the inventory 

component is removed, real final sales of domestic product were up only 

1.4% after a 5.4% gain in the second quarter. 

     PCE was up 4.0% in the third quarter after a 3.8% rise in the 

second quarter, in line with retail sales and PCE data that showed 

continued solid growth with some moderation at the end of the quarter. 

The moderately faster third quarter rate reflected larger gains for both 

goods PCE and services PCE compared with the previous quarter. 

     Government spending rose 3.3% in the third quarter after a 2.5% 

rise in the second quarter. Federal government spending was up 3.3%, 

while state and local government spending rose 3.2%.

     The FOMC had predicted 3.1% GDP growth for 2018 in its September 

SEP estimates. The average pace of the first three quarters appears to 

be slightly ahead of that trend, coming in at 3.3%.                                     

     ** MNI Washington Bureau: Tel. (202)371-2121 ** 

[TOPICS: MAUDS$,M$U$$$,MT$$$$]