The Gross Domestic Product (GDP) number is the cumulative production of all goods and services in the United States and along with the Unemployment Number is one of the most-watched indexes the Federal Reserve Board pays attention to. gdp numbers weakThe GDP is released quarterly and the Commerce Department reported today that the 3rd quarter early release GDP number came in right at 2.8 percent, slightly above the 2.5 percent number for the 2nd quarter.

 The number was ahead of the 2.00 percent anticipated by the economic prognosticators but still well below what economists say is required to get the unemployment rate to fall.  For the unemployment rate to fall a full percentage point, the GDP number needs to be at least 3.00 percent. The quarterly GDP report and the unemployment report are almost joined at the hip as one affects the other. As the unemployment rate falls, the Fed is closer to discontinuing their $85 billion per month in mortgage backed security and bond purchases, which is helping to keep rates low.

Yes, the GDP count was higher than expected, slightly, and has increased over the previous 12 month period, but there are some indications that future GDP numbers will be disappointing.  One contributor to the 3rd quarter GDP is business inventories, which increased at a 0.8 percent clip. Not bad but that can mean one of two things: manufacturers are increasingly optimistic and stocking their shelves or manufacturers are looking at stocked shelves because no one is buying. The same report showed that consumers increased their spending by 1.5 percent but that’s the slowest rate of spending growth in the past four years.

The next GDP report won’t be released until early next February but it’s already expected to be somewhat of a disappointment. The partial government “shutdown” might be blamed or the fact that so many have pulled out of the workforce that consumer spending falls could be regarded as the culprit. On the other hand, we could all be pleasantly surprised and the GDP numbers climb back to a respectable level.

In the meantime, real estate investors can expect financing rates to remain low. But once the Fed begins to taper their $85 billion in monthly purchases, don’t be surprised to see long term rates jump a full percentage point in no time.