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Economy in Brief

US 3Q GDP Revised Slightly Lower
by Tom Moeller December 21, 2005

US real GDP growth for 3Q was revised down slightly to 4.1% (AR) and fell short of Consensus expectations for no change to earlier estimate of 4.3% growth.

A weakened estimate of domestic demand growth caused the downward revision. Real PCE was lessened to 4.1% (3.8% y/y) from 4.3% growth and the strength in business fixed investment was lessened to 8.4% (8.3% y/y) from 8.7%. Lastly, growth in residential investment growth was dropped to 7.3% (7.2% y/y) from 8.4%.

The estimate of inventories contribution to GDP growth was unrevised at -0.4 percentage points but the drag from the foreign trade deficit was lessened as exports grew 2.5% (6.9% y/y).

The chain price index was revised up to 3.3% from 3.0% and the price index for domestic final sales rose 4.3% (3.4% y/y).

Operating corporate profits are estimated to have declined 4.0% (+15.7% y/y) versus an initial estimate of a 3.4% decline. Financial sector earnings were reduced further and fell 20.5% (+5.4% y/y), crushed by three hurricanes. Profits of domestic nonfinancial corporations also were reduced and fell 1.1% (+18.6% y/y) versus the initial estimate of a slight 0.2% gain.

Shifting Data: A Challenge for Monetary Policy Makers from the Federal Reserve Bank of San Francisco is available here.

Greenspan's Unconventional View of the Long-Run Inflation/Output Trade-off from the Federal Reserve Bank of St. Louis can be found here.

Chained 2000$, % AR 3Q '05 (Final) 3Q '05 (Prelim.) 2Q '05 Y/Y 2004 2003 2002
GDP 4.1% 4.3% 3.3% 3.6% 4.2% 2.7% 1.6%
  Inventory Effect -0.4% -0.4% -2.1% -0.7% 0.3% 0.0% 0.4%
Final Sales 4.6% 4.7% 5.6% 4.3% 3.9% 2.7% 1.2%
  Foreign Trade Effect -0.1% -0.3% 1.1% 0.2% -0.5% -0.3% -0.6%
Domestic Final Demand 4.5% 4.7% 4.2% 4.1% 4.4% 3.0% 1.8%
Chained GDP Price Index 3.3% 3.0% 2.6% 2.9% 2.6% 2.0% 1.7%
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