US GDP Preview: No revision to third quarter pace

• US GDP to maintain 3.5% growth in Q3.
• China-US trade dispute escalating ahead of G-20.

The first revision to the third quarter annualized gross domestic product figure will be released by the Bureau of Economic Analysis, a division of the Commerce Department on Wednesday November 28th at 8:30 am EST, 13:30 GMT

Forecast

American economic growth in the third quarter is expected to remain at 3.5% when the Bureau of Economic Analysis (BEA) issues its first revision, the second or 'preliminary' release of the GDP numbers. The BEA revises the GDP figures twice after the initial release, at one month intervals, as more information on the economy becomes available. 

The US economy expanded smartly in July, August and September though moderating from the 4.2% growth of the second quarter. A strong labor market with 3.7% unemployment, good job creation and rising wages supported a healthy consumer sector. Manufacturing employment continued its excellent run. Personal spending and income expanded steadily in the quarter though at a slightly slower pace than in the second quarter.  None of these factors have changed substantially since the original BEA calculation.  

International trade and growth

One source of potential revision is international trade. The BEA includes a net import/export number in its GDP estimate with imports subtracting and exports adding to GDP.  If imports were higher than the original forecast or exports lower that could drag down GDP, with the reverse true if imports were weaker and exports stronger. 

The trade dispute between the US and China has become more vocal ahead of the G-20 meeting in Argentina this weekend. President Trump has said that his administration plans to increase existing tariffs on $200 billion of Chinese goods and will add tariffs to the remaining $267 billion of Chinese imports if the two nations cannot come to an agreement. An initial Chinese report of a deal has been disavowed. Mr. Trump also noted to the Wall Street Journal that he does not expect these measure will be postponed, suggesting that an agreement is not near.

Economic growth in the US is thought to have dropped substantially into the final quarter. The Atlanta Fed’s GDPNow model posits a 2.5% expansion in the last three months of the year. That could change as preliminary retail sales numbers become available. Spending figures from the traditional start of the holiday shopping season this past Friday were robust.  

Federal Reserve and the dollar

The Federal Reserve’s anticipated 25 basis point increase to Fed Funds rate in December will not be affected by this GDP revision though higher US economic growth will give the bank a larger cushion for its policy. Stronger than expected GDP will tend to support the US Dollar but it is not a large immediate factor.