Gavekal Capital: Service Sector Contributes Practically Nothing To 3Q GDP...Is This A Signal That The US Is Already In A Recession?

Thursday, December 5, 2013

Service Sector Contributes Practically Nothing To 3Q GDP...Is This A Signal That The US Is Already In A Recession?

The second release for the 3Q GDP was revised up today from 2.8% AR to 3.6% AR. This increase is mainly attributable to further inventory accumulation. Personal consumption expenditures on services only contributed 2 basis points to real GDP. This is the lowest contribution since 2009. And perhaps most concerning, going back to 1948 PCE services have had at least one negative contribution quarter in 9 out of the last 11 recessions. So watching future revisions to this data point will be important.

Also, keep an eye on a component of the PCE services, household consumption expenditures on services. This was just slightly negative at -1 basis point. Going back to 1959, every time this series has had at least one quarter of negative contribution to real GDP the US was in a recession.

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