MBS MID-DAY: Tradeflow Considerations Trump Strong GDP


– Final GDP +4.1 vs +3.6 forecast
– Biggest gain since Q4 2011
– Consumer Spending +2.0 vs +1.4 previously
– No major change in Business Inventories
– Market Reaction: MBS and Treasuries only moderately weaker. Fairly resilient so far actually.

Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — increased at an annual rate of 4.1 percent in the third quarter of 2013 (that
is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau
of Economic Analysis. In the second quarter, real GDP increased 2.5 percent.

The GDP estimate released today is based on more complete source data than were available for
the “second” estimate issued on December 5, 2103. In the second estimate, the increase in real GDP was
3.6 percent (see “Revisions” on page 3). With this third estimate for the third quarter, increases in
personal consumption expenditures (PCE) and in nonresidential fixed investment were larger than
previously estimated.

The increase in real GDP in the third quarter primarily reflected positive contributions from
private inventory investment, PCE, nonresidential fixed investment, exports, residential fixed
investment, and state and local government spending that were partly offset by a negative contribution
from federal government spending. Imports, which are a subtraction in the calculation of GDP,

The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in
private inventory investment, a deceleration in imports, and accelerations in state and local government
spending and in PCE that were partly offset by a deceleration in exports.

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