The Bureau of Economic Analysis (BEA) released the third estimate of real GDP growth for the third quarter of 2016. Real GDP grew at a 3.5% seasonally adjusted annual rate, slightly better than the second estimate of 3.2%. Growth was 1.4% in the second quarter. The upward revision was based largely on slightly faster growth in personal consumption expenditures (PCE) and stronger investment spending, faster growth in the structures and intellectual property components combined with less decline in equipment investment.
Solid consumption spending and a firming of business fixed investment are encouraging signals for overall strength going forward but the double digit growth in exports is unlikely to be sustained in coming quarters. It’s more likely exports will decline and be a drag on growth in the fourth quarter.
We expect exports will hold down growth in the next quarter but solid consumption spending, a rebound in equipment spending and dwindling drag from the energy sector to support an improving outlook over the medium term.