Looking ahead, we maintain our outlook for real GDP growth of 0.5% q/q saar in the fourth quarter, with the lagged effects of monetary policy tightening leading to further moderation in consumer spending alongside continued weakness in business fixed investment. Less restocking may have also helped reduce import demand, thereby playing a role in the narrowing trade deficit. In our view, this is consistent with the return of most inventory-to-sales ratios outside of the auto sector to pre-pandemic norms and fears of overbuilding amid slower domestic demand. While much has been made of a potential shift in firm inventory behavior from "just in time" to "just in case", the GDP data paint a picture of a sharp deceleration in inventory building. However, inventory accumulation began to slow rapidly thereafter and inventories shaved 0.8pp off growth in the current quarter. Inventory accumulation contributed a massive 2.0pp and 5.0pp (percentage points), respectively, to growth in 3Q 21 and 4Q 21, and inventories made a small positive contribution to growth in the first quarter of this year. economy came with a strong rebound in inventories, as the rotation of household spending toward services and the partial unclogging of global supply chains allowed producers to catch up. Altogether, the GDP report points to cooling domestic demand, but also sends signals of resiliency in household spending. Households may be feeling the pinch from higher inflation, but spending on services has generally held up better than we had expected. In our view, the bright spot in the 3Q GDP data was services consumption, which rose by a solid 2.8%. In addition, private consumption rose by only 1.4%, with the ongoing rotation of spending leading to a third straight quarterly decline in spending on goods (-1.2%). Business fixed investment fell 4.9% in the quarter, largely due to further retrenchment in residential investment spending (-26.4%) and non-residential structures (-15.3%). Indicators of domestic demand, however, paints a less rosy picture, with final sales to domestic purchasers up only 0.5% q/q saar (quarter over quarter seasonally adjusted annual rate). After reaching record levels earlier this year, the trade deficit has narrowed sharply. That said, the rebound was driven almost entirely by trade, with net exports adding to growth. GDP (Gross Domestic Product) revealed that the economy rebounded in the third quarter by an annualized rate of 2.6%, in line with our expectation (BofA Global Research: 2.5%). The Bureau of Economic Analysis’ (BEA) advance estimate of U.S. You should review your particular circumstances with your independent legal and tax advisors.GDP rebounded, but domestic demand is slowing and its affiliates do not provide legal or tax advice to clients. This information is being used to support the promotion or marketing of the planning strategies discussed herein. This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is not intended to be tax or legal advice. Please review the privacy and security policies of web sites reached through links from BMO web sites. Links to other web sites do not imply the endorsement or approval of such web sites. Third party web sites may have privacy and security policies different from BMO. If the requested information is not provided within 30 calendar days, the account will be subject to closure. The information you provide in this form may be used to perform a credit check and verify your identity by using internal sources and third party vendors. We may also ask you to provide a copy of your certificate of incorporation (or similar document) or other identifying documents. For each business or entity that opens an account, we will ask for your name, address and other information that will allow us to identify the entity. We may also ask you to provide a copy of your driver's license or other identifying documents. When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. 107 56 signed into law October 26, 2001)) requires all financial organizations to obtain, verify and record information that identifies each person who opens an account. To help the government fight the funding of terrorism and money laundering activities, federal law (USA Patriot Act (Title III of Pub.
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