In today's anticlimatic economic print of the day, moments ago the BEA reported that Q3 GDP declined from 2.1% as per the first revision reported a month ago to 1.97%, fractionally higher than the 1.9% expected, as a result of a modest decline in Personal Consumption Expenditures as well as Private Inventories and Net Trade, offset by a fractional pick up in Fixed Investment, a category which will see far more downside in the quarters to come unless oil prices rebound, and the smallest possible increase in government spending.
As the detailed breakdown chart below shows, there were no material changes among the key GDP categories.
PCE printed at 3.0% in the final revision, same as a month ago, and above the 2.9% expected. Looking at the personal consumption components shows where the changes were: while Financial Services and Insurance saw an annualized drop of $9.4 billion to $729.5 billion, this was offset by another increase in recreation services ($3.1BN), Furnishings and Durable Household Equipment ($2.9BN), and Gasoline and energy goods which rose $1.5 billion.
That said, the biggest risk remains in the one category we have flagged since the summer: Private Inventories, which while revised modestly lower from a change of $100BN in Q3 to $95.3BN, still suggest there is a massive inventory overhang heading into Q4 and 2016, one which will likely impact GDP by at least 1.5%-2% if not more once this long overdue inventory liquidation takes place.