Author: Gaghan

Q3 GDP expands 33.1%:

The U.S. economy grew 33.1% in Q3, in line with the preliminary estimates, 10bps below consensus. This is the biggest
expansion in GDP ever, as the economy gradually recovered from the record drop of 31.4% in Q2. The expansion
reflected positive contributions from private inventory investment, exports, nonresidential fixed investment, and
residential fixed investment. The Fed sees the U.S. economy shrinking 6.5% in 2020.
• Personal spending 10bps above expectations:

Personal spending climbed 0.5% m/m in October, after increasing 1.2% (revised down from 1.4%) in September. The
increase was led by both goods and services, where consumption rose 0.2% and 0.6%, m/m, respectively. Within
goods, spending was boosted by recreational goods and vehicles, while services was driven by health care
spending.

• The 10-year bond yield remained flat in November:
The 10-year yield declined 3bps in November and closed at 0.842%. In early November, the 10-year rate jumped to a
high of 0.975%, its highest point since March 20, as a slew of positive news on the coronavirus vaccine front drove
investors out of safe assets. The yield since drifted lower as investors digested the surge in new virus cases that has led
to new lockdown restrictions. During the month, the two-year bond remains unchanged at 0.15%.

Q3 GDP expands 33.1%:

The U.S. economy grew 33.1% in Q3, according to the preliminary estimate, 210bps better than consensus. This is the
biggest expansion in GDP ever, as the economy gradually recovered from the record drop of 31.4% in Q2. The
expansion reflected positive contributions from private inventory investment, exports, nonresidential fixed investment,
and residential fixed investment. The Fed sees the U.S. economy shrinking 6.5% in 2020.

• Personal spending 40bps above expectations:
Personal spending climbed 1.4% m/m in September, after increasing 1% in August. The increase was led by both
goods and services, where consumption rose 2.0% and 1%, m/m, respectively. Within goods, spending on durable
and nondurable goods was up 3.0% and 1.5%, respectively.

• The 10-year bond yield continues to recover:
The 10-year yield gained 19bps in October and closed at 0.874% on the back of the reopening of the economy and
vaccine hopes. During the month, the two-year bond gained 2.5bps to close the month at 0.156%

Q2 GDP shrank 31.4%:
The U.S. economy shrank 31.4% in Q2, according to the final number, 30bps better than consensus and the second
estimate. It remains the biggest drop in GDP ever, as the COVID-19 pandemic hurt consumer and business spending.
The contraction reflected negative contributions from PCE, private inventory investment, nonresidential fixed
investment, residential fixed investment, and state and local government spending. The Fed sees the U.S. economy
shrinking 6.5% in 2020.

• Personal spending continues to ease, above consensus:
Personal spending rose 1% m/m in August, easing from a 1.5% gain in the previous month, 20bps above consensus.
The increase was led by services, where consumption rose 1.1% m/m, and offset by goods, where consumption
declined 0.2% m/m. Within goods, spending on durable goods remained flat while nondurable goods spending
declined 0.2%.

• The 10-year bond yield remain stable:
After a 17bps gain in August, the 10-year yield remained stable in September and closed at 0.68%. During the month,
the two-year bond also remained more or less flat at 0.13%.

Q2 GDP shrank 31.7%:
The U.S. economy shrank 31.7% in Q2, according to the second estimate, 80bps better than consensus and 120bps
above the preliminary estimate. It remains the biggest drop in GDP ever, as the COVID-19 pandemic hurt consumer
and business spending. The contraction reflected negative contributions from PCE, private inventory investment,
non-residential fixed investment, residential fixed investment, and state and local government spending. The Fed sees the U.S. economy shrinking 6.5% in 2020.