Contributions to Final Q3 GDP

This morning the BEA released its final Q3 GDP figures. GDP was revised up 0.1% from the preliminary estimate (Nov’ 23rd) to a 2.6% annualized growth rate. The consensus estimate was for 3.0% GDP growth.

Below is a chart I have posted previously that is updated for Q3 final GDP. Personal consumption accounted for 1.7% growth in the quarter with changes in inventory contributing 1.6%. Net exports were down 1.7%. In 2011 look for gains from inventory to diminish and possibly be offset by net exports. Since Q3 2006 quarter-over-quarter change in inventory has contributed, on average, 0.1% to GDP and net exports 0.4%.

Click to Expand

More details via Econoday:

The upward revision was primarily due to a higher estimated for inventory investment with small improvements to net exports and residential investment also contributing. Softening the upgrade were downward estimates for personal consumption, nonresidential fixed investment, and government purchases.

The biggest disappointment of the report is that demand numbers were revised down. Final sales of domestic product were lowered to 0.9 percent from last month’s estimate of 1.2 percent. Final sales to domestic purchasers were downgraded to 2.6 percent from the second estimate of 2.9 percent for the third quarter.

Absolute strength within final sales is still found in PCEs, revised down to an annualized 2.4 percent boost in the third quarter from the prior estimate of 2.8 percent. Investment in equipment & software gained 15.4 percent versus the previous third quarter estimate of 16.8 percent. Government purchases advanced 3.9 percent, compared to 4.0 percent for the prior third quarter figure. Absolute weakness was found in residential and nonresidential investment. Also, net exports worsened.

Year-on-year, real GDP in the second quarter is up 3.2 percent, compared 3.0 percent in the second quarter.

On the inflation front, the GDP price index’s growth rate for the third quarter was nudged down to 2.1 percent annualized from the prior estimate of 2.3 percent. The consensus forecast was for 2.3 percent.

Probably the best thing you can say about today’s report is that it reflects old data. The mix between final sales and inventories is not as good as expected. But more recent economic data have been far more upbeat. Most likely, the final figures for third quarter GDP will not have a significant impact on estimates for fourth quarter GDP.

On the news, equities eased but remained positive.


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