Q3 GDP Unchanged At Record 33.1% In First Revision; Profits Soar 27.1%

With traders’ eyes looking beyond Q4 GDP and to Q1 2021, where some banks such as GDP are already expecting a double dip with a -1.0% contraction forecast, few will care how or why the BEA revised its estimate of the record Q3 GDP, but for the record, moments ago the Dept of Commerce announced that in the third quarter, GDP rose an annualized 33.1%, unchanged from the first estimate released in October, and on top of consensus expectations.

Of note, personal consumption rose 40.6% in 3Q after falling 33.2% prior quarter, and just missing the 40.9% estimate. While the overall change in GDP was unrevised from the advance estimate, upward revisions to business investment, housing investment, and exports were offset by downward revisions to state and local government spending, inventory investment, and consumer spending. Imports were revised up.

Specifically:

• Personal Consumption was revised modestly from 25.27% in the original estimate to 25.22%
• Fixed Investment rose from 4.96% to 5.23%
• The Change in Private Inventories dipped from 6.62% in the original estimate to 6.55%
• Net exports detracted -3.17% from GDP, modestly more than the -3.09% in the original estimate
• Government consumption subtracted -0.76% from the final number, up from -0.68% in the original estimate

The BEA also calculated that profits increased a record 27.1% at a quarterly rate in the third quarter after decreasing 10.3% in the second quarter. Corporate profits increased 3.3% in the third quarter from one year ago. Profits were impacted by provisions from the Paycheck Protection Program. More details:

• Profits of domestic nonfinancial corporations increased 43.8 percent after decreasing 12.9 percent.
• Profits of domestic financial corporations increased 5.4 percent after increasing 6.1 percent.
• Profits from the rest of the world increased 10.3 percent after decreasing 18.9 percent.

Finally, for inflation watchers, the GDP price index rose 3.6% in 3Q after falling 1.8% prior quarter; it was unchanged from the original estimate. Meanwhile, core PCE rose 3.5%, also in line with expectations, after falling 0.8% prior quarter.