Bill McBride on today's GDP report:
Q3 GDP: Growth slightly above Expectations, but Weak Personal consumption: The advance Q3 GDP report, with 2.8% annualized growth, was above expectations. However some of the details were weak. Personal consumption expenditures (PCE) increased at a 1.5% annualized rate - the slowest rate since Q2 2011.
"Change in private inventories" added 0.83 percentage points to GDP in Q3. This was above expectations of a 2.0% growth rate, but mostly because of inventories.
It appears that the drag from state and local governments has ended, although the drag from Federal government spending is ongoing. The Federal government subtracted 0.13 percentage points in Q3, whereas state and local governments added 0.17 percentage points.
Residential investment (RI) remains a bright spot (increasing at a 14.6% annualized rate), and RI as a percent of GDP is still very low - and I expect RI to continue to increase over the next few years. ...
I expect state and local governments to continue to make small positive contributions to GDP going forward. ...
The key story is that residential investment is continuing to increase, and I expect this to continue. Since RI is the best leading indicator for the economy, this suggests no recession in the near future (with the usual caveats about Congress).
Finally, real GDP has increased only 1.6% over the last year (Q3 2012 to Q3 2013). Because GDP growth was very weak in Q4 2012, it will only take 1.5% annualized growth in Q4 to reach the lower end of the Fed's GDP target.