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Real gross domestic product increased at an annual rate of 3.4% in the third quarter, according to the BEA’s advance estimate released October 29. Growth in the second quarter was 2.2%. The BEA said the increase reflected higher investment, consumer spending and government spending. A decrease in exports partly offset them.
The cleanest read on private demand is final sales to private domestic purchasers. That measure strips out trade, inventories and government. It rose 4.9% in the third quarter after 4.6% in the second. Households and businesses kept spending through a quarter that ended with the Fed’s first hike in three years.
How the Fed reads it
Chair Warsh previewed the number the day before it came out. He told reporters the third quarter was “likely running above 3 percent growth.” He also noted that first-half growth had been revised up to 2.4%. Strong growth with inflation above target is the combination behind the two dissents for a hike at the October meeting.
Demand is not slowing on its own. Lenders should expect the Fed to keep leaning against it.
- Expect loan demand to hold up into the fourth quarter. Price new credit for a rate path that may still rise.
- Keep an eye on concentrations that grow fast in a strong quarter, such as construction and consumer lines, before the cycle turns.
Zovos links each economic release to the credit and liquidity assumptions that depend on it. A GDP surprise then points to the reviews it affects.
This is for information only and is not legal or investment advice. Advance estimates are revised, so verify all figures against the linked primary sources before acting.