Q3 GDP Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Commerce Department report on Q3 GDP:

--

“The first estimate of third quarter economic growth showed a strong pace of 4.9%, more than twice the rate of growth that is likely to be sustainable over time. As always, this estimate will be revised over the next two months as more data come in. There are two factors contributing to this strong growth. 

“First, consumer spending on goods and services remained quite strong. Some of the strength is due to a big increase in spending on durable goods as well as a pickup in estimated spending on housing and utilities. As excess savings built up during the pandemic continue to drop and wage gains decelerate, it is difficult to see how this pace of consumer spending growth can be maintained. We are now seeing some consumer stress in the rising delinquency rates for credit cards and auto loans.

“The second driver of growth this quarter was a big increase in private inventories. These jumps can often be reversed in subsequent quarters, and we do expect that will contribute to slower growth in the fourth quarter.

 "The annual change in core PCE, a key inflation measure for the Federal Reserve, fell to 2.4% from 3.7% last quarter.  This might be the best news in this report, as it shows progress towards the Fed’s 2% goal, despite the robust GDP growth in the third quarter.”