Flash Notes

Alvin Liew [email protected] Global Economics & Markets Research Email: [email protected] URL: www.uob.com.sg/research

Flash Notes

Wednesday, 30 November 2016

US: A Robust 3Q 2016 GDP Growth Revised Higher To 3.2% nd




The 2 cut of US 3Q 2016 GDP growth was revised higher to 3.2%q/q SAAR in line with our expectations (UOB:3.3%) from advance estimate of 2.9% and better than Bloomberg median forecast of 3.0%. This was the strongest growth since 3Q 2014, while 2Q 2016 growth was unchanged at 1.4%.




The upward revision was mainly thanks to higher personal spending (2.8%, 1.89ppt from 2.1%, 1.47ppt) and unexpectedly strong export of soya beans which lifted 3Q export growth to 10.1% (from 10% in advance estimate), adding to net exports’ contribution to headline growth (0.87ppt from 0.83ppt) while the drag from residential investments softened (-4.4%, -0.17ppt from -6.2%, -0.24ppt). The negatives in the 3Q revision were that non-residential investment growth was markedly lower at 0.1%, 0.02ppt (from 1.2%, +0.15ppt) while government spending was also weaker at 0.2%, 0.05ppt (from 0.5%, 0.09ppt). The contribution from inventories was also reduced to+0.49 ppt (from +0.61ppt).




US growth in the rest of 2016 will remain supported by the US consumer and housing market improvement but the sub2%y/y outcomes in the first 3 quarters of 2016 means that full-year growth would come in below 2% in 2016 unless we get an extraordinarily strong 4Q growth. [1.6%y/y in 1Q, 1.3%y/y in 2Q and 1.6%y/y in 3Q] Thus, growth is now expected to be 1.7% in 2016 (from 2%), matching the recent low recorded in 2013. For next year, we expect US growth to come in above its potential output at 2.7% in 2017, again anchored by US consumer & housing market with the potential added fiscal boost from US President Trump’s reflationary policies likely to kick in more prominently in the latter half of 2017 and 2018. Growth Contributions To 3Q16 GDP – Private Spending and Exports Playing More Prominent Roles After Revision 6.0 4.0 2.0 0.0 -2.0 -4.0

Residential Investments Change in Inventories Govt Spending GDP Growth (%q/q SAAR)

-6.0 -8.0 Mar 09

Jan 10

Nov 10

Sep 11

Non-residential Investments Net Exports of Goods & Services Personal Consumption Expenditure (PCE)

Jul 12

May 13

Mar 14

Jan 15

Nov 15

Sep 16

Source: CEIC, Global Economics & Markets Research Estimates (As of 30 Nov 2016)

Please see the BEA report for the 3Q 2016 GDP (2nd estimate) on 29 Nov 2016.

Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that the reader is able to assume these risks. This document and its contents are proprietary information and products of UOB Group and may not be reproduced or otherwise. Singapore Company Reg No. 193500026Z