US Economic Update – November 2013

US GDP rose by 2.8% (annualized rate) in the September quarter, continuing the improvement experienced over the course of the past year. However, details a bit weaker as the stronger growth reflected a pick-up in inventories.

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  • US GDP rose by 2.8% (annualized rate) in the September quarter, continuing the improvement experienced over the course of the past year. However, details a bit weaker as the stronger growth reflected a pick-up in inventories.
  • Bernanke’s replacement by Yellen as head of the Fed early next year will mean the evolution in Fed policy will continue, with additions to, or clarification of, existing forward guidance the most likely first steps.
  • Still expect QE tapering to start in March 2014.

US GDP in the September quarter grew by 0.7% qoq or at an annualised rate of 2.8%. Since the almost zero growth in the December quarter 2012, GDP growth has strengthened in each quarter.

However, the underlying details are a bit less positive. The stronger growth was due to a more rapid build up in inventories which are not a sustainable source of growth. While net exports strengthened and residential housing investment again grew strongly, business investment was quite weak. Consumption growth also softened to its lowest rate since the June quarter 2011, although excluding the weather sensitive electricity and gas utility category, growth has actually strengthened modestly over the last two quarters, consistent with a fading impact from the start-of-year tax increases.

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