Blogger and Commenter RJS, 3rd Quarter GDP Grew at a 2.1% Rate, Revised from 2.0%; All on Inventories, No Real Final Sales The Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% annual rate over the quarter, revised from the 2.0% growth rate reported in the advance estimate a month ago, as personal consumption expenditures grew more than was previously estimated and inventory investment shrunk by less than was previously reported, more than offsetting small downward revisions to fixed investment and net exports….in current dollars, our third quarter GDP grew at a 8.08% annual rate, increasing from what would work out to be a ,741.0 billion a year
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Blogger and Commenter RJS, 3rd Quarter GDP Grew at a 2.1% Rate, Revised from 2.0%; All on Inventories, No Real Final Sales
The Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% annual rate over the quarter, revised from the 2.0% growth rate reported in the advance estimate a month ago, as personal consumption expenditures grew more than was previously estimated and inventory investment shrunk by less than was previously reported, more than offsetting small downward revisions to fixed investment and net exports….in current dollars, our third quarter GDP grew at a 8.08% annual rate, increasing from what would work out to be a $22,741.0 billion a year output rate in the 2nd quarter to a $23,187.0 billion annual rate in the 3rd quarter, with the headline 2.1% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 5.9% were computed from the price changes of the components and applied to their current dollar change….
As we review this month’s revisions, remember that the GDP news release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 3rd quarter GDP, which we find linked on the BEA GDP landing page, which also offers links to just the GDP tables on Excel and other technical notes…specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2017; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components….the pdf for the 3rd quarter advance estimate, which this estimate revises, is here…
Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 1.6% growth rate shown in the advance estimate to a 1.7% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 7.086% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated personal consumption inflation grew at a 5.3% annual rate in the 3rd quarter, which was unrevised from the PCE inflation rate reported a month ago…real consumption of durable goods shrunk at a 24.4% annual rate, which was revised from the 26.2% contraction rate shown in the advance report, and subtracted 2.50 percentage points from the GDP growth rate, as real consumption of motor vehicles and parts shrunk at a 50.2% annual rate and accounted for roughly 70% of the decrease in durable goods….real consumption of nondurable goods by individuals grew at a 2.6% annual rate, essentially unrevised from the growth rate reported in the 1st estimate, and added 0.39 percentage points to the 3rd quarter’s economic growth rate, as a 12.4% real growth rate in consumption of gasoline and other fuels accounted for more than half of the growth in non-durables….at the same time, consumption of services rose at a 7.6% annual rate, revised from the 7.9% growth rate reported last month, and added 3.29 percentage points to the final GDP growth tally, as real transportation services grew at a 37.3% rate and accounted for more economic growth in the 3rd quarter than housing, health care or foods services among the quarter’s broad based growth in services…
Meanwhile, seasonally adjusted real gross private domestic investment grew at an 11.6% annual rate in the 3rd quarter, revised from the original 11.7% growth estimate reported last month, as real private fixed investment shrunk at a 1.1% rate, revised from the 0.8% contraction rate reported in the advance estimate, while the postive change in inventory investment was greater than previously estimated…investment in non-residential structures was revised to show contraction at a 5.0% rate, not as steep as the 7.3% contraction rate previously reported, and real investment in equipment contracted at 2.4% rate, revised from the 3.2% rate shown in last month’s estimate…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 12.2% rate to growth at a 9.3% rate, while real residential investment was shown to be shrinking at a 8.3% annual rate, revised from the 7.7% contraction rate shown in the previous report…after those revisions, the decrease in investment in non-residential structures subtracted 0.13 percentage points from the 3rd quarter’s growth rate and the decrease in investment in equipment subtracted 0.13 percentage points from the quarter’s growth rate, while growth in investment in intellectual property added 0.47 percentage points to the growth rate of 3rd quarter GDP, while the contraction in residential investment subtracted 0.41 percentage points from the growth rate of GDP…
At the same time, investment in real private inventories contracted at an inflation adjusted $73.2 billion rate in the 3rd quarter, revised from the originally reported inventory shrinkage at an inflation adjusted $77.7 billion rate…this came after inventories had shrunk at an inflation adjusted $168.5 billion rate in the 2nd quarter, and hence the $95.4 billion improvement in the change in real inventories increased the growth rate of gross investment and hence of GDP, adding 2.13 percentage points to the 3rd quarter’s growth rate, revised from the 2.07 percentage point addition to the GDP growth rate due to inventory improvement that was shown in the advance estimate….however, since a relative improvement in inventories indicates that more of the goods produced during the quarter were left in warehouses or “sitting on the shelf”, their quarter over quarter increase at a $95.4 billion rate meant that growth of real final sales of GDP was relatively smaller by that much, and hence real final sales of GDP was statistically unchanged in the 3rd quarter, revised from the 0.1% real final sales contraction rate shown in the advance estimate, but quite a contrast from the real final sales growth at a 9.1% rate in 2nd quarter, when that quarter’s larger decrease in inventory growth meant that a greater part of the increase in domestic output had been sold…
The previously reported decrease in real exports was revised further downward with this estimate, while the previously reported increase in real imports was revised lower by a bit less, and as a result the change in our net trade was a slightly greater subtraction from GDP than was previously reported…our real exports fell at a 3.0% rate, revised from the 2.5% contraction rate reported in the first estimate, and since exports are an addition to GDP because they are part of our production that was not consumed or added to investment in our country, their decrease subtracted 0.33 percentage points from 3rd quarter GDP, rather than the 0.28 percentage point subtraction shown last month…meanwhile, the previously reported 6.1% increase in our real imports was revised to a 5.8% increase, and since imports are subtracted from GDP because they represent either consumption or investment added to an other GDP component that was not produced here, their increase subtracted 0.83 percentage points from 3rd quarter GDP, revised from the 0.87 percentage point subtraction shown last month….thus, our deteriorating trade balance subtracted a net of 1.16 percentage points from 3rd quarter GDP, rather than the rounded 1.14 percentage point subtraction that had been indicated by the advance estimate..
Finally, the entire government sector grew at a 0.9% rate, revised from the 0.8% growth rate previously reported, as federal government consumption and investment shrunk a bit more than was indicated in the initial estimate, while real state & local government consumption and investment grew somewhat faster than had been previously indicated….real federal government consumption and investment was seen to have shrunk at a 4.9% rate from the 2nd quarter in this estimate, revised from the 4.7% contraction rate reported in the advance estimate, as real federal outlays for defense fell at a 1.6% rate, revised from the 1.4% contraction rate shown previously, and subtracted 0.06 percentage points from 3rd quarter GDP, while all other federal consumption and investment shrunk at a 9.3% rate, revised from the 9.2% contraction rate shown previously, and subtracted 0.28 more percentage points from 3rd quarter GDP….meanwhile, real state and local consumption and investment grew at a 4.7% rate in the quarter, which was revised from the 4.4% growth rate reported in the 1st estimate, and added 0.50 percentage points to the 3rd quarter’s growth, after a decrease in real state and local investment at a 4.2% rate had subtracted 0.08 percentage points from the 0.58 percentage point increase…..note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…