It was reported today that the U.S. third quarter GDP fell 0.4%, ending The States’ expansion at 33 consecutive quarters.

A negative third quarter result was expected, but most economists called for about a 1% drop. However, BMO Nesbitt Burns notes that these early estimates contain incomplete data for September. “Consumer outlays slowed to only a 1.2% pace. There were widespread declines in capital spending, while housing slowed significantly. Exports and imports imploded at annual rates of around
15%, testifying to the slowing global economy,” says BMO.

CIBC World Markets also cautions that there’s a greater risk of a larger-than-typical revision to this first estimate. “We had anticipated an even deeper investment decline as the key to our more negative GDP forecast. But with equipment orders still plunging, the trend shows no sign of letting up in the final quarter of the year. The other negative was a further sharp draw down in inventories.”

“Friday’s employment data, and the signposts for consumer spending, will have much more bearing on our Q4 outlook than this backward looking data. Mechanically, the larger-than-expected drop in inventories in Q3 would on its own, boost our Q4 GDP estimates, which looked for a roughly 1% decline. But we will reserve judgement on that score until we see the more critical data on October payrolls,” says CIBC.

BMO isn’t putting too much weight on these numbers either, noting, “The economy began a steeper descent late in Q3. So, these figures do not help much in quantifying the rate of decline going forward. The monthly data releases are much more important and they have been going from bad to worse recently.”