Downside risks to GDP

Monday 2 December 2013

From UBS another take on yesterday’s GDP partials:

Q3 inventories fell 0.5% q/q (-0.4%pts); & profits/sales/wages also all soft
Real private non-farm inventories surprisingly fell 0.5% q/q in Q3 (UBS -0.1%, mkt 0.0%, after 0.4%); subtracting a solid 0.4%pts from GDP (UBS: -0.2%pts, albeit offsetting +0.4%pts in Q2). Meanwhile, real sales (production) rose only 0.4% q/q (after 0.3%), ticking down to 0.8% y/y (the slowest since Q111). On the income side, the nominal wages bill (income) increased 0.7% q/q (after 1.0%), and picked up to a still very low 3.1% y/y. Nominal profits (GOP) lifted 3.9% q/q (UBS & mkt: 1.0%, after 0.4%), rebounding to 8.9% y/y – but Inventory Valuation

Implications – Q3 GDP downside risk (UBSe +0.6%)
Q3 GDP partials were clearly weaker – stocks will subtract solidly, sales and wages rose only modestly, and GDP-profits were ~flat – now suggesting downside risk to our below consensus 0.6% q/q forecast (ahead of trade and public data tomorrow).

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.