The US Q3 GDP has been revised up to 5.2%, indicating a key change.

Today, the United States released a revised GDP for Q3. Let's look at the revised results and how the market interprets this data.

The data shows that in the third quarter, the revised GDP increased at a QoQ rate of 5.2%, which is higher than the economist's expected 5%, further highlighting the strong performance of the US economy.

The contribution to this revision mainly comes from non-residential investment. Data found that this category increased by 1.3% instead of the previous decline of 0.1%, driven by construction investment, which increased from the previous 1.6% to 6.9%. Non-residential building investment does not only refer to building factories. Buying commercial buildings, hotels, mines, etc. are also included. However, no matter what category it is, the increase in construction investment reflects that, in the third quarter, American companies are still relatively confident about the future.

The second largest contributor is the state and local government, whose growth rate has been revised from 3.7% to 4.6%, which is basically the same as the past two quarters. The spending growth of governments in 2023 is larger than that in the past two years, which has a certain boosting effect on the economy this year.

On the other hand, consumption is the part that dragged down GDP. The overall consumption growth rate was revised down from 4% to 3.6%, with significant downward adjustments in durable goods and services consumption, especially in the service industry, which was adjusted from 3.6% to 3.0%. This indicates that consumers are not as strong as we imagined, but even after the revision, the growth rate is still very high and is not enough to cause concerns about the economy.

For US stock investors, inflation and corporate profit adjustments may be more important than the changes in GDP. PCE inflation was downgraded in the third quarter, although only by a small margin of 0.1%, from 2.9% to 2.8%. While economic growth is increasing, inflation is being downgraded, approaching 2%, which means we need to question the relationship between economic growth and inflation.

Can the future economy, including Q4 GDP data, maintain this performance? The answer is that it is difficult to say as the detailed data from the third quarter shows that fiscal policy played a significant role in driving economic growth. Non-residential investment, which contributed the most to economic growth, has a lot to do with government subsidies, while the second-largest contribution source, state and local government spending, also indicates the role of fiscal policy in promoting the economy. However, it is difficult to sustain high growth in government spending.

Conversely, consumption, which is the most important factor in ensuring a healthy economy, has become a drag on the economy after this adjustment. Therefore, I believe that the slowdown in the economy is still the trend, and market expectations may not have changed. We also need to maintain an open-minded attitude and not underestimate the possibility of future risks just because of optimistic past data.