Tuesday, November 25, 2014

Third Quarter Growth Revised Up to 3.9%

Real GDP increased at an annual rate of 3.9% in the third quarter of 2014, up 0.4 percentage points from the Bureau of Economic Analysis’s preliminary estimate. The improvement from the first estimate was driven by better than expected consumption and nonresidential fixed investment, as well as a smaller drop in inventory investment. Third quarter growth, remains slightly below the strong 4.6% increase seen in the second quarter.

The deceleration in growth from the second quarter to the third was driven primarily by declining inventory investment, which contributed 1.4% to growth in the previous quarter. Inventories tend to fluctuate, as such this slowing was expected. Currently, the inventory to sales ratio remains near an all-time low, boding well for future growth.

Consumption remained the primary driver of growth, contributing 1.5 percent, down slightly from the 1.8 percent in the second quarter.

Fixed investment slowed somewhat in the second quarter, contributing 1.0% to growth. This was driven by a deceleration in both residential and non-residential investment.

Net exports contributed 0.8% to GDP. Exports increased 4.9% in the third quarter, compared with an increase of 11.1% in the second. Imports decreased 0.7%, in contrast to an increase of 11.3% the previous quarter.

Government expenditures, which contributed to 0.8% of GDP, increased 9.9% in the third quarter, compared with a 0.9% decrease in the previous quarter. Notably, defense spending increased 16.0% over the quarter.

Read the BEA report.

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