The 3Q2017 GDP was revised upwards to 3.3% annualized rate from 3%, indicating the economy grew at its fastest pace since 3Q2014 supported by business equipment and inventory, added with consumer spending and corporate earnings. If we exclude the inventory contribution, the GDP expanded at 2.5%. Still we believe the strong GDP print strengthens the case for the US Fed to raise rates by 25bps during the December FOMC meeting.

• The 3Q2017 GDP was revised upwards to 3.3% annualized rate (est. 3.2%) from 3%. The latest figure presents the fastest growth since 3Q2014.

• Growth was largely supported by spending on business equipment which gained 10.4%, a three-year high from 8.6%; consumer spending, the biggest part of the economy, growing 2.3% (est. 2.5%); revised from 2.4%; down from 3.3% in 2Q; and corporate pre-tax earnings rising 5.4% y/y, following a 6.3% y/y gain.

• Meanwhile, if we exclude the contribution of inventory to GDP, the 3Q2017 GDP growth is overstated. For 3Q2017, inventory investment contributed 0.8 percentage point to GDP growth versus previously reported 0.73 percentage point. If we exclude inventory, which makes up for nearly 25% of GDP growth, the 3Q2017 GDP grew at 2.5%.

• Slower consumer spending likely reflected the impact of Hurricanes Harvey and Irma, which struck Texas and Florida during the 3Q2017. Spending is also being constrained by a sluggish wage growth. It has forced households to dip into their savings, reflected by the drop in saving rate to 3.3% in 3Q2017 from 3.7% in 2Q2017.

• Nonetheless, we believe the strong GDP print strengthens the case for the US Fed to raise interest rates by 25bps during the December FOMC meeting.

Source: AmInvest Research - 30 Nov 2017