An upside surprise to this AMs GDP report–up 2.8% over the quarter (at an annualized rate), when expectations were for 2%.

The source of the acceleration is largely from the volatile inventory sector, so I wouldn’t read too much into it.  Given generally tepid consumer and (non-residential) investor demand, both of which were pretty blah in today’s report, and the continued fiscal drag from the federal government (which will be worse in Q4 as per the shutdown), it’s not a slam dunk that firms are really building up their inventories, though exports outpaced imports, so perhaps there’s something there.  (For you statistical mavens, the inventory growth component to the GDP accounts is a change in a change, so it’s always a lot more noisy than other components.)

Final sales, which excludes the inventory buildup, posted the expected 2% pop, and those who know my methods know I prefer to filter out some of the quarter-to-quarter noise by plotting year-over-year quarterly changes.  The figure below shows that by this metric, the growth slog continues, with real GDP up 1.6% for the last two quarters, a deceleration from rates we were posting a year ago, and below the growth rate needed to drive faster job growth and reduced unemployment.

So, one certainly welcomes this Q3 acceleration, but let’s see if it sticks.

Source: BEA