Our calculations now suggest that GDP growth slowed to only 1.5% annualised in the third quarter. Even after the disappointment of September’s retail sales figures, third-quarter consumption growth was probably still as high as 3.0%. Unfortunately, the $6.5bn widening in the trade deficit in Augustincidates that net trade subtracted 0.7% points from GDP growth. (See Chart.) The drag from the slowdown in the pace of inventory accumulation was apparently even bigger. Net trade will continue to be a drag on the economy for some time yet, but we nevertheless expect GDP growth to rebound to 2.5% in the fourth quarter.
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