Yes, the headline seasonally adjusted annual rate real GDP figure was stronger than expected at 3.5 percent versus expectations for 3.3 percent. That would appear to be a good thing. Not to mention there was a larger than expected cooling of consumer price pressures (inflation). But looking a bit deeper into the data, the picture becomes a bit more blurry. Like a Picasso painting, you can see whatever you want to see.
What drove GDP? To start with the positive piece, consumption. Of the 3.5 percent headline, consumption was 2.69 percent of the print. The consumer showed up with its wallet open in the third quarter. After that data point, the data becomes a bit more blurry. Inventories, which are highly volatile, contributed 2.03 percent of the 3.5 percent, and net exports, which represent the drag from imports, subtracted 1.78 percent. Both of these are wildly volatile and tend to reverse from large contributions in coming quarters. So, it should be expected that inventories will be a drag to coming GDP reports and net exports should be less of a drag or even a contributor.
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