After second quarter real GDP growth came in surprisingly below expectations, GDP growth looks to have rebounded in the third quarter.

Consumer spending started off the quarter strong before softening somewhat, but should remain a primary driver of growth, albeit a more modest pace, as retail sales bounced back in September. Outside of the consumer, business inventories are expected to provide a modest lift to headline GDP, after more than four quarters of detracting from growth.

Net exports will likely provide a positive boost to growth also as the overall trade deficit has narrowed significantly relative to Q2.

However, we do not expect real export or business inventories to be large contributors to U.S. GDP growth over the longer term.That said, the strong rebound in third quarter GDP growth bodes well with our expectations of the Fed raising rates at its December meeting.