24/7 Wall St.

Investors and economists alike were looking for a solid read on gross domestic product (GDP) long before they were considering what this week’s unemployment and payrolls data might look like.

24/7 Wall St. would point out that most economic readings in the third quarter and at the start of the fourth quarter tend to seem in a trend of slower growth.

The big question is what this will mean for GDP revisions in the third quarter and what fourth quarter GDP will look like. As a reminder, the view a week earlier was that several issues might have skewed the strong GDP number.

One thing that outshined the rest of the issues was that we finally saw a large pop higher in productivity for a 3.1% gain in the third quarter. This might have been one of the contributing boosts for trade at the end of the quarter. That being said, ISM non-manufacturing was signaling slower growth, and we saw mixed manufacturing data throughout the week.

The trade deficit narrowed in September to $36.4 billion from $40.5 billion in August. This was better than expectations of a narrowing to $38.0 billion or so. The deficit in goods narrowed to $57.5 billion from $60.1 billion (slightly worse revision). The services trade surplus experienced a solid gain, rising to $21.2 billion from $19.7 billion.

After looking back over the trade deficit data for September and after taking other data into consideration, the Merrill Lynch team increased its third-quarter tracking estimate on the GDP revision up by 0.1 points to 3.1%. They said:

Total exports look a touch stronger, while import growth edged slightly lower. The risk for the fourth quarter and beyond is that we see a reversal and trade becomes a drag on the US economy.

Exports this quarter were boosted by strong soybean demand diverted into the US after a weak harvest in South America, while imports slowed due to the Hanjin Shipping bankruptcy. In addition, the outlook for the dollar is to the upside as the US economy strengthens and the Fed continues to normalize policy.

There is still quite a lot that has to take place before the next revision is seen on third-quarter GDP. There is also the election that has to be digested.