US: A slowdown in Q3 economic growth – Wells Fargo

The US Bureau of Economic Analysis showed that the US economy grew at an annual rate of 2.9% during the third quarter, surpassing expectations and the previous estimate of 2.6%. Analysts at Wells Fargo, point out that the still modest growth in the core areas of the economy and weakness in real gross domestic income, more clearly demonstrates the slowdown in Q3 economic growth.

Key Quotes: 

“The headline continued to be flattered by a sizable gain in net exports due to an unsustainable gain in exports and decline in import activity.”

“There was also a modest upward revision to real personal consumption expenditures, which now look to have risen at a 1.7% annualized pace in Q3 amid upward revisions to goods consumption specifically. Real final sales to domestic purchasers were thus revised modestly higher to nearly a 1% gain in Q3, demonstrating a still-slow but better pace of growth for the core of the U.S. economy.”

“This release also included the first look at Gross Domestic Income (GDI), which in theory should be equivalent to GDP. The two have diverged recently, but the gap in the year-ago pace of the two narrowed to just 0.4% in Q2, from 1.1% in Q2. Still, the more modest 0.3% gain in the annualized rate of real GDI for Q3 and downward revisions to Q2 which flipped a 0.1% gain to a 0.8% decline provide further evidence the economy is slowing. The headline GDP growth rate continues to overstate strength in Q3, in our view.”