The US economy’s emergence from recession was less marked than previously thought. In its third estimate released today, the Bureau of Economic Analysis once again revised the third quarter increase in GDP downwards. This showed the US economy expanding at an annual rate of 2.2% (2nd estimate: 2.8%, 1st estimate: 3.5%). The main factors behind the correction were downward revisions to both government and private investment spending. The scale of the rundown in inventories was also jacked up further.
However, there are several pointers to suggest that the economy has picked up substantial steam in the current quarter. We regard an increase of up to 4% (annual rate) as feasible. Following the persistent drawdown in inventories, which of late had pushed production more than 1% below overall sales, there are now signs of a marked boost from inventory investment in particular. This alone could contribute around 2½ percentage points to growth. In addition, we are likely to continue to see a clear recovery in exports and a moderate upward trend in personal consumption expenditure.