GDP grows at revised 4.9% rate in 3Q

WASHINGTON – The nation’s real gross domestic product adjusted for inflation increased at a revised annual rate of 4.9 percent in the third quarter, accelerating from the second quarter’s 3.8-percent-per-year pace, according to preliminary estimates released today by the U.S. Department of Commerce’s Bureau of Economic Analysis.
The third-quarter growth rate – the fastest in four years – is a full percentage point higher than the “advance” estimate the BEA released last month, when less data was available. (READ MORE) The revised GDP matched the mean prediction from a Bloomberg News survey of 75 economists. (Their estimates ranged from 3.9 percent to 5.5 percent.)
The BEA credited the acceleration largely to faster growth in exports, personal consumption expenditures (PCE) and private inventory investment, partly offset by higher imports, a continued decline in residential fixed investment (mostly housing construction) and a slowdown in nonresidential construction.
Real (inflation-adjusted) exports of goods and services rose 18.9 percent over the quarter, more than doubling the previous quarter’s 7.5-percent increase. Real imports rose 4.3 percent, erasing the second quarter’s 2.7-percent decline.
Real nonresidential fixed investment increased a revised 9.4 percent, improving from the 7.9 percent of the advance estimate, but still lagging the second quarter’s 11.0-percent rise. Nonresidential construction rose a revised 14.3 percent, rather than the initial estimate’s 12.3 percent; equipment and software investments rose a revised 7.2 percent, up from the initial estimate’s 5.9 percent.
Real residential fixed investment (mostly, home construction) fell a revised 19.7 percent, improving from the 20.1-percent decline of the advance estimate, but still worsening from the second quarter’s 11.8-percent decline.
Gross domestic purchases – purchases by U.S. residents of all goods and services, wherever they were produced – rose an inflation-adjusted 3.4 percent in the third quarter, up from the initial estimate’s 2.8 percent, accelerating from the second-quarter’s 2.4-percent increase.
The price index for gross domestic purchases – a measure of prices paid by U.S. residents – increased 1.6 percent in the third quarter after rising 3.8 percent in the second quarter. The core index excluding food and energy rose 1.7 percent in the quarter just ended, accelerating from the second quarter’s 1.5-percent gain.
Real PCE – personal spending adjusted for inflation – increased a revised 2.7 percent in the third quarter, down from the 3.0 percent of the advance estimate. But it still nearly doubled the second quarter’s 1.4-percent rise.
The odds of a recession still “are much too close for comfort,” Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto, told Bloomberg News. “We are likely to see growth of less than 1 percent in the fourth quarter.” Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York, echoed his comments, saying: “Stronger growth in the third quarter implies weaker growth in the fourth quarter due to a partial payback in both trade and inventories.”
The preliminary GDP report is the second of three for the quarter; a final third-quarter report will be posted by the BEA next month, when more data is available.
Additional information, including the full Gross Domestic Product and Corporate Profits report, is available from the U.S. Department of Commerce’s Bureau of Economic Analysis at www.bea.gov.