US Q3-18 GDP report shows a solid trend in consumption

Key points: US GDP increased slightly above expectations in Q 3 -1 8 at 3 . 5 % Q/Q SAAR . The surprise came from consumption as household spending grew by a hefty 4.0%. However, business investment decelerated during the quarter with a pull-back in mining investment and less spending on equipment. As expected, residential investment weakened while the sharp negative contribution from net exports was offset by a massive inventory build-up. Another noteworthy point is that the core PCE deflator, the Fed’s favorite inflation gauge, rose less than expected. Looking forward, we expect another strong quarter of growth in Q4 with a strong labor market and lingering effect s from the fiscal stimulus.