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US Q3 and Q4 GDP Will Be Above Expectations

Data published yesterday suggest that Q3 GDP will be revised upward on December 5th. It is very likely that the figure will be above 3% (QoQ Annualized) following the upward revision of total business inventories in August and a stronger than expected rise in September. Moreover, in the same time, the revision of September retail sales was also positive.


According to Census, total business inventories rose 0.6% MoM in September (against 0.3%e MoM) while August data were revised from +0.3% MoM to 0.4% MoM. On the other hand, retail sales were revised in September from +0.3% MoM to 0.4% MoM.


In the meantime, retail sales were largely above expectations in October at +0.4% MoM (against +0.1%e MoM) which confirms that the impact of government shutdown was limited. As a consequence, the consensus should rise its expectations of a 2% (QoQ Annualized) growth in Q4.


These figures show that economic situation has improved since the last FOMC meeting so that 2013 forecasts set in September should be met.

CBO Issues Analysis of President Obama’s 2014 Budget

CBO has updated its baseline budget projections, which were previously issued in February 2013. Unlike its estimates of the Presidents budget, CBOs baseline projections largely reflect the assumption that current tax and spending laws will remain unchanged, so as to provide a benchmark against which potential legislation can be measured. Under that assumption, CBO estimates that the deficit would total $642B in 2013 and that the cumulative deficit over the 2014-2023 period would amount to $6.3T.


According to CBOs and JCTs estimates, enactment of the Presidents proposals would, relative to CBOs baseline, boost deficits between 2013 and 2015 but reduce them by increasing amounts from 2016 through 2023:


1/ The deficit in 2013 would equal $669B (or 4.2 percent of gross domestic product [GDP]), $27B more than the amount projected in CBOs baseline.
2/ In 2014, the deficit would increase slightly in nominal terms, to $675B (or 4.1 percent of GDP). That deficit would be $115B more than the shortfall projected for next year in CBOs baseline.
3/ In 2015, the deficit would fall to $437B (or 2.5 percent of GDP) but remain $59B above the amount projected for that year in CBOs baseline.
4/ In subsequent years, the deficit would decline further relative to GDP, reaching 2.2 percent in 2016 and 2.0 percent in 2017 and 2018, but then would increase again, remaining above 2 percent of GDP through 2023.
Deficits in the 2016-2023 period would be smaller than the amounts in CBOs baseline by between 0.1 percent and 1.4 percent of GDP each year (see figure below).
In all, deficits would total $5.2T between 2014 and 2023 (or 2.4 percent of total GDP projected for that period), $1.1T less than the cumulative deficit in CBOs baseline. Federal debt held by the public would increase from 73 percent of GDP ($11.3T) at the end of 2012 to 77 percent ($12.8T) at the end of 2014.
In each subsequent year, debt would decline as a percentage of GDP, reaching to about 70 percent ($18.1T) in 2023. In contrast, under the assumptions of CBOs current-law baseline, debt held by the public would be rising-relative to GDP after 2018 and would stand at about 74 percent of GDP ($19.1T) in 2023.