Did Third-Quarter GDP Surge at the Expense of Fourth-Quarter Production?
Economic output grew more than expected in the third quarter, according to a revised estimate released by the Bureau of Economic Analysis on Friday. Real gross domestic product — “the output of goods and services produced by labor and property located in the United States” — increased at an annual rate of 4.1 percent on the quarter, an increase from the prior estimate of 3.6 percent growth. The revision was due primarily to larger personal consumption expenditures and fixed non-residential investment.
“The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and accelerations in state and local government spending and in PCE that were partly offset by a deceleration in exports,” reports the Bureau of Economic Analysis.
Markets edged higher following the good news, but there are some underwhelming aspects of the GDP report worth pointing out. Perhaps chief among them is strong inventory growth, which contributes positively to third-quarter numbers but could foreshadow a decline in fourth-quarter production. The change in real private inventories added 1.67 percentage points to the third-quarter GDP, compared to 0.41 percentage points in the second quarter. Excluding private inventory changes, third-quarter GDP increased just 2.43 percent.