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Economy in Brief

U.S. GDP Growth Is Revised Upward Due To Higher Inventories
by Tom Moeller  November 29, 2012

The economy grew faster than initially reported during Q3'12. Real GDP increased at a revised 2.7% (2.5% y/y) annual rate, up from a 2.0% advance estimate and up from 1.3% during Q2. Consensus expectations were for a 2.8% rise. A faster rate of inventory accumulation accounted for the revision as inventories backed up with reduced growth in domestic demand.

The quicker rate of inventory accumulation added 0.8 percentage points to growth last quarter, up from the 0.1 point subtraction estimated earlier. Accumulation of nonfarm inventories sped up and added 1.2 points to growth. That pickup may have been involuntary, however, given that domestic demand growth was reduced and weak. Farm inventories alone reduced GDP growth by an unrevised 0.4 percentage points due to the drought.

Growth in domestic final demand was taken down to 1.7% (1.9% y/y) from last month's estimated 2.3% advance. Except for Q2 of this year, growth was the weakest since Q1'11. Growth amongst all the demand components was reduced. Personal consumption expenditure growth was reduced to 1.4% (1.8% y/y) from 2.0% and business spending fell at a 2.2% (+4.5% y/y) rate instead of a -1.3% rate of decline reported earlier. Growth in residential investment was revised down minimally to 14.3% (13.7% y/y) and government spending also was reduced just a tad to 3.5% (-0.6% y/y).

Improvement in the foreign trade sector contributed minimally to last quarter's GDP advance instead of subtracting 0.2 percentage points from growth. That was due to an improved 1.1% (3.0% y/y) gain in exports instead of a 1.6% decline. This nevertheless was the weakest growth since Q2'09. The uptick in imports was little revised at 0.1% (2.7% y/y).

Corporate profits growth, reported for the first time, picked up to 3.5% (8.7% y/y). After tax profits rose 5.2% (18.6% y/y). Last quarter's gain owed to an 18.3% (30.4% y/y) jump in financial sector earnings. Foreign sector profits fell 0.6% (-3.1% y/y) and domestic nonfinancial earnings slipped 0.1% (+6.4% y/y).

The GDP chain price index rose at an elevated and minimally revised 2.7% (1.7% y/y) rate, bolstered by a 6.5% (-1.3% y/y) decline in the import price index. The gain in the domestic final sales price index remained moderate at a 1.5% (1.4% y/y) rate.

The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA.

 

Chained 2005 $,% AR Q3'12 (Revised) Q3'12 (Advance) Q2'12 Q1'12 Q3'12
Y/Y
2011 2010 2009
Gross Domestic Product 2.7 2.0 1.3 2.0 2.5 1.8 2.4 -3.1
 Inventory Effect 0.8 -0.1 -0.5 -0.4 0.6 -0.2 1.5 -0.8
Final Sales 1.9 2.1 1.7 2.4 1.9 2.0 0.9 -2.3
 Foreign Trade Effect 0.1 -0.2 0.2 0.2 0.0 0.2 -0.4 1.0
Domestic Final Sales 1.7 2.3 1.4 2.2 1.9 1.8 1.3 -3.3
Demand Components
Personal Consumption 1.4 2.0 1.5 2.4 1.8 2.5 1.8 -1.9
Business Fixed Investment -2.2 -1.3 3.6 7.5 4.5 8.6 0.7 -18.1
Residential Investment 14.3 14.4 8.4 20.6 13.7 -1.4 -3.1 -22.4
Government Spending 3.5 3.7 -0.7 -3.0 -0.6 -3.1 0.6 3.7
Chain-Type Price Index
GDP 2.7 2.8 1.6 2.0 1.7 2.1 1.3 0.9
Final Sales of Domestic Product 2.8 2.9 1.5 2.0 1.7 2.1 1.3 0.9
Final Sales to Domestic Purchasers 1.5 1.6 0.7 2.5 1.4 2.5 1.6 -0.2
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