US GDP due out at 8:30 AM. A decline to +2.8% Annualized is expected.

At 8:30 AM the US GDP for the 3rd quarter will be released. This is the second cut of the number, with the first estimate coming in at +3.5%.    That estimate was based on uncomplete data. This release will include such things as the Trade Balance data for September which was released on November 13th and showed a larger deficit. A larger deficit is a negative for GDP.  As a result, Net Exports will help contribute to a decline in the first estimate. 

The expectation is for a decline to a gain of +2.8% from the original estimate of 3.5%. In addition to a negative effect from trade, Personal Consumption data - the largest component of GDP -  is also expected to be revised lower to + 3.2% from +3.4% on an annualized basis.  The GDP Price Index is expected to show a gain of 0.8% which is unchanged from the initial report.  Finally the Core PCE QoQ is expected to show a rise of 1.4% also unchanged from the prior release. 

The release can be quite volatile as it will also include pieces for government and investment (i.e.  business investment, residential purchases, inventories go in this component piece).  It also includes inventories which in the first release contributed 0.94% to the GDP.

Of the pieces which make up the 3.5% GDP, Personal Consumption contributed the most on an annualized basis. Below is breakdown on how much each component contributed to the 3.5% annualized GDP figure:

Personal Consumption: +2.36% (67%)
Gross Private Domestic Investment +1.22% (34%)
Net Exports -0.53% (-15%)
Governmant Consumption +0.48% (14%)

The US GDP is presented on a Annualized Basis.  That is it takes the quarter on quarter change and annualizes that change.  So it tends to have more of an impact in the newspaper headlines.  That is, the 1st and 2nd quarters can show a decline but the 3rd quarter rebounds and the release shows a growth rate of 3.5% on the nightly news.  The true GDP growth for the year of 2009 is of course less once you factor in the declines in the 1st and 2nd quarter and annualize that value.    

Most other country GDP releases are presented on a quarter on quarter change basis.   The Eurozone GDP estimate for example showed a gain of +0.4% for the quarter.