What today’s headline number masks is the underlying stability of the consumer. On its own, consumer spending contributed 2.19% to economic growth. After a weak start to the year, where consumer spending only contributed 1.19% to GDP, consumer spending has contributed over 2% for two consecutive quarters. Consumer spending has contributed at least 2% to GDP for 6 out of the last 8 quarters. This provides some evidence that the consumer is spending some of the savings from low energy prices and cheap imports. Of the 2.19% contribution to growth, purchases of durable goods like motor vehicles, furnishings and recreational goods & vehicles contributed .99%. The remaining 1.20% contribution came from spending on services with health care expenses being the biggest source of spending.

The remaining contributors to economic growth were as follows:

Commercial construction: (.11%)

Equipment: +.31%

Intellectual property products: +.07%

Residential construction: +.20%

Government spending: +.30%

Other: .01%

One observation to note is that government spending is no longer a drag on the economy. The negative effects from the fiscal tightening have passed through and now, with the budget deal that has been tentatively agreed upon by Congress, government spending is set to increase. This will bear monitoring since, without offsetting revenue, increased government spending will lead to wider deficits and a faster pace of debt accumulation.

Today’s GDP number was in line with consensus forecasts from economists surveyed by Bloomberg. As discussed above, today’s GDP number will be revised twice before it is finalized and, over the past several years, revisions have sometimes been surprisingly large.

This number does not really change much from the Federal Reserve’s perspective. This is now historical information and the Federal Reserve is focusing on current incoming data to determine whether an interest rate increase in December is justified.