What Do I Expect From the BEA Q3 GDP Report?

On October 29, BEA will report its Q3 GDP results of the U.S.  It is widely speculated that Q3 GDP should grow at 2.0% rate.  But the direct reading from the CMI weighted index points to a contraction of 2.0%.  Using the equation I introduced as shown here and considering the drop of the inventory reduction of Q3 in 2009 to 0.5% from about 2.0% in Q2 of 2009, I expect the Q3 expansion should be -1.5% plus inventory adjustment in Q3.

Today’s durable goods report, which indicates the September durable goods orders dropped 0.8% excluding transportation, enhances my belief that the Q3 GDP starts contracting.

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