As usual, let's break down the GDP components to see what had happened in Q3.
GDP growth = G + I + C + NENE=Export - Import
Q2 GDP (Final) = (-0.01) + 0.82 + 2.51 + (-1.1) = 2.22 (2.2)
Q3 GDP (1st estimate) = 0.9 + 3.27+ 2.52 + (-3.32) = 3.37 (3.4)
After breaking down the GDP components, we could see that the government spending (G) and investment (I) increased significantly. The government increased its spending to boobst the economy and the investment spiked because of inventory buildup and AI expenditures. However, the consumption (C) was relatively stagnant due to the high inflation. Moreover, the US net export (NE) declined significantly and this would contribute to the widening US trade deficit.
What could have caused the inventory to build up? Either the suppliers are stockpiling for the upcoming festive season or the suppliers have encountered some difficulty in reducing their inventories because the US consumers have cut back on their spending due to the rising inflation. We will know in due course when the inventories don't get depleted to normal level in the next GDP estimate.
Last but not least, the US core PCE inflation (YOY) had increased to 3.1% in September. In the end, the above factors caused the US headline GDP to spike but with a grim outlook.
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