U.S. Q3 GDP beats expectations, gold price ticks up but remains down on the day

(Kitco News)The U.S. economy grew more than expected in the third quarter, the U.S. Bureau of Economic Analysis reported on Thursday.

The preliminary estimate showed that the U.S. Q3 GDP rose 2.6% versus markets’ expectations of a 2.4% increase. This comes after two negative readings of -1.6% and -0.6% in Q1 and Q2, respectively.

“The increase in real GDP reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, that were partly offset by decreases in residential fixed investment and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased,” the report said.

Gold price saw some volatility following the data release, first edging up and then losing momentum. December Comex gold futures last traded at $1,662.50, down 0.40% on the day.

On the inflation front, the PCE price index slowed and came in at 4.2% compared to the previous advance of 7.3%. Core PCE, which strips out volatile food and energy prices and is the Federal Reserve’s preferred inflation metric, was at 4.5% compared to an increase of 4.7% posted in the prior quarter.  

The rebound in growth in the third quarter is slightly misleading, according to analysts.

“The 2.6% annualized rebound in third-quarter GDP looks impressive, but it was entirely due to a 2.7% boost from net external trade. Final sales to domestic purchasers, a better measure of underlying economic demand, increased by only 0.1% annualized, the worst showing since the second quarter of 2020 when the pandemic struck,” said Capital Economics chief North America economist Paul Ashworth.

This is why this type of growth is not likely to be sustained going forward. “Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year,” Ashworth added.