GDP Upswing: Revealing the Strongest Quarterly Reading Since 2021 | Episode 077 | 11-29-2023

In today's episode, Megan Horneman the Chief Investment Officer at Verdence Capital Advisors, discusses the revised second reading of the third-quarter GDP  The initial 5 percent reading has been revised to 5.2 percent, marking the best quarterly performance since Q4 2021.  Private investment soared in both residential and non-residential structures. Government spending surpassed expectations, while inventories notably increased. However, Megan mentions about how personal consumption, a major GDP component, saw a downward revision.  Regarding inflation, the personal consumption expenditures for the quarter are indicating a downward trajectory, aligning with other reports that suggest a decrease in inflation. Megan suggests a steady course for the Fed, with the December meeting likely to leave things unchanged.  Stay tuned for more updates this week! We'll be talking about crucial data on inflation, personal income, and spending, as well as the ISM Manufacturing Report. For questions or comments, feel free to reach out to us at podcast at verdence dot com.

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today with our regular segment of Markets with Megan, and we're going to talk about the second reading on third quarter GDP that we received this morning. The reading came in better than the initial reading, which was 5 percent. The GDP actually came in at 5.2 percent after the revisions. It's the best quarterly reading that we've seen since the fourth quarter of 2021. But let's dig into some of the things that changed since the initial reading. First of all, for the better, which helped the upward revision was private investment, not just in non-residential structures, but also in residential structures, which is a little surprising to me, given the weakness we've seen in the housing market. Also, we saw government spending, which came in higher than expected, as well as an increase in inventories. On the downside, there were a couple of things that were revised lower. If you look primarily, we're going to focus on personal consumption. That makes up the majority of GDP and that was revised lower, but it still is making up about half of that GDP number. We saw less spending on not only cars but also the service sector, which is something we have not seen in quite some time. On the inflation front, we did get the personal consumption expenditures for the quarter and they are trending lower. This confirms some of the other reports that we've gotten on inflation that inflation is coming down.

And then what do we think on this Going forward? Remember this is a backward-looking report going forward into the fourth quarter and we've already seen some weakness and gotten some weak data points. We think the Fed is probably on hold at the December meeting, but they would probably reference this GDP report that the economic activity still remained strong. So don't get too excited about any kind of rate cuts anytime soon. They don't want to reignite inflation, so any softness in their tone could definitely do that. Some of the other things that we'll be looking at this week and we'll come back with additional markets with Megan's we have inflation data coming out tomorrow as well as personal income and spending, and then we'll get the ISM Manufacturing Report on Friday. So we'll come back with more information on those reports as we get them. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.