Thursday, December 20, 2012

Third Quarter GDP Growth Revised Up to 3.1%

Real economic growth for the third quarter was revised up to 3.1% in the BEA’s final estimate released today. The upward revision puts third quarter growth 50% higher than the first estimate. This third and final estimate is higher than the second estimate of 2.7% and even higher than the initial estimate of 2.0%. Third quarter growth was the fastest pace seen all year.

Overall, third quarter GDP growth was led by consumption, with strong contributions from both government spending and inventory accumulation. Consumption contributed 1.1% to third quarter growth, up from the second quarter, but far from the strong levels seen at the end of last year continuing into the first quarter. Government spending provided its largest boost to growth in three years, adding 0.8% to growth. Inventory accumulation also made strong contributions to growth, adding 0.7%.

Although the strong third quarter growth is encouraging, it is unlikely that either the government or inventory contributions are sustainable. Strong inventories tend to be a bad sign for future growth, and government spending is expected to fall sharply in the coming year.

Compared to the previous estimate, the upward revisions were due primarily to improvements in trade, including more exports and fewer imports. Government spending, at both state and local levels also increased, reaching its largest contribution to growth in three years. Consumer spending also improved from the initial estimate. In fact, residential investment was the only category to see a downward revision.

Read the BEA report.

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