In the immediate aftermath of Hurricanes Harvey and Irma, Wall Street quickly trimmed its Q3 GDP forecasts from 3.0% to the low/mid 1% range, expecting a substantial, if brief, adverse impact on US growth from the storm devastation. However, moments ago the BEA surprised everyone when it reported that in its first estimate of third quarter growth the US economy grew an unexpectedly hot 3.0%, putting all fears of a hurricane-induced slowdown in the rearview mirror, and suggesting that the economy may indeed be starting to overheat with a second consecutive 3.0% or higher GDP print, as if the hurricanes did not have any adverse impact on the economy at all (they did, but as we explain below, the BEA simply decided to ignore the impact of the hurricanes).
The Q3 GDP was above the consensus estimate of 2.6% and just below the 3.1% in the second quarter. The back to back 3.0% or higher prints are the fastest pace of growth since the 4.6% and 5.2% revised GDP growth reported for Q2 and Q3 2014
Looking at the components, Personal Consumption rose 2.4%, above the 2.2% expected, and contributed 1.62% to the bottom line Q3 GDP, which while down from the 2.24% in Q2, was still stronger than expected.
The increase in consumer spending reflected increases in spending on both goods and services. The increase in goods was mostly attributable to motor vehicles, and the increase in services primarily reflected increases in health care, in financial services and insurance, and in food services and accommodations.
The big driver of GDP growth was the…Read More