skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

3Q15 GDP Data Probably More Representative than the Street Credits

The U.S. Bureau of Economic Analysis today put its preliminary estimate of 3Q15 real GDP growth at 1.5%. Nominal GDP grew at an annualized rate of 2.7%, so that inflation as per the GDP deflator proceeded at a rate of 1.2%. For the last 4 quarters as a whole, the growth rates are 2.0% real, 2.9% nominal and 0.9% inflation.

Many financial market commentators are looking beyond the soggy headline GDP data, pointing out that abstracting from foreign trade and inventory drags, real domestic demand grew at a more impressive 2.9% rate. We are inclined to focus more on the headline number. That slower growth reflects the impact of a phenomenon we have previously highlighted in By the Numbers: the fading US manufacturing sector.

Business and foreign demand for US manufactured goods has softened this year and indeed has been soft for most of the last 4 years, interrupted only by a pickup last year. Domestic consumer demand for goods has grown nicely in 2015, but much of that demand goes to imports, thus providing little boost to GDP. So, the soggier movements in US foreign trade and inventories that putatively held down 3Q15 growth are nothing more than a reflection of factory sector realities.

Those trends were disrupted earlier this year by the incidence of the winter blizzard and port strikes in San Pedro/Long Beach, but they have reappeared in 3Q15 and will likely continue to reassert themselves going forward. The bottom line is that with the manufacturing sector declining, it will be tough if not impossible to sustain decent growth within the goods sectors of GDP.

Meanwhile, the early-2015 spurt in nonresidential construction looks to have topped out, and the housing upturn may soon as well, judging by this week’s new-home sales data. Rising construction activity has offset the drag from manufacturing so far this year, but that may not be the case going forward. We could be looking at one-handle GDP growth on an ongoing basis.

Underlying Growth in Nominal and Real GDP
Underlying Growth in Nominal and Real GDP Chart
Chart Source: Bureau of Economic Analysis. As of 30 Sep 15

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.