US 4Q GDP growth is now likely to come in a little below 2.0% - Capital Economics

FXstreet.com (San Francisco) - The US GDP has increased by 2.7% in the third quarter, an upward revision from first estimated of 2.0%, a really encouraging data that has pushed the EUR/USD to touch the 1.3000 level just after the economic release.

According to the Commerce Department, the annualized GDP grow at 2.7% pace in the 3Q, better than the 1.3% advance in the second quarter. Expectations were a 2.8% rise and despite missing a bit the number, the data is really good.

But Capital Economics Chief US Economist Paul Ashworth believes that the current data signals that the "fourth-quarter GDP growth is now likely to come in a little below 2.0%," as "most of that growth was driven by inventory building and government spending."

Why? Ashworth points that "the details of the report add to the evidence that growth has probably slowed" in the next quarter. "Inventories are now estimated to have added 0.8% to overall GDP growth, whereas the first estimate indicated that they subtracted 0.1%. The bigger the build up in the third quarter, the more likely we are to see a run down in the fourth."

In addition, "net exports are now estimated to have added 0.1% to growth rather than subtracting 0.2%. On the downside, however, consumption growth was revised down to 1.4%, from 2.0%," Capital analyst adds. "Despite that weaker growth, the personal saving rate was actually revised down to 3.6%, from 3.7%, thanks to an even bigger downward revision to third-quarter income growth."

Ashworth also comments that "business investment is now estimated to have contracted by 2.2%, rather than 1.3%." and the Government spending is still "estimated to have increased by a massive 3.5%."

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