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Economy in Brief

U.S. GDP Growth Is Revised Up With Inventories; Corporate Profits Decline
by Tom Moeller  November 24, 2015

Economic growth was revised higher to 2.1% (AR) during Q3'15 versus the advance reading of a 1.5% increase. The gain followed unrevised 3.9% growth during Q2. A slower rate of inventory decumulation reduced growth last quarter by 0.6 percentage points, revised from 1.4 points. Final demand growth was lessened to 2.7% from 3.0% as deterioration in the foreign trade deficit subtracted a greater to 0.2 percentage points. Domestic final sales growth of 2.9% was unrevised. The upward revision to GDP last quarter matched expectations in the Action Economics Forecast Survey. The GDP chain price index rose 1.3%, revised from 1.2%.

Reported for the first time, corporate profits without inventory valuation and capital consumption adjustments fell 3.2%, the first decline since Q4'14. The y/y increase was reduced to 1.4% from 8.5% in Q2. Earnings from abroad fell 7.4% (-12.2% y/y) while financial sector profits declined 2.2% (-4.9% y/y). Nonfinancial sector earnings grew 1.2% (-2.2% y/y).

Domestic final demand growth of 2.9% reflected a 3.0% improvement in consumer expenditures which was slower than originally estimated. Durable goods spending growth eased to a little-changed 6.5% as spending on motor vehicles grew 3.0% (3.3% y/y), furniture & appliances gained 8.5% (6.1% y/y) and recreational goods jumped 10.1% (8.4% y/y). Spending on nondurable goods grew 4.0% (3.0% y/y), revised from 3.5% and services spending gained a lessened 2.2% (2.8% y/y). Business fixed investment improved a slightly greater 2.4% as equipment spending improved 9.5% (1.7% y/y), bolstered  by a 26.6% jump (8.6% y/y) in information processing equipment. Intellectual property products purchases eased slightly (+5.4% y/y). Residential investment growth was revised up to 7.3%.

Growth in government purchases was unrevised at 1.7% as defense spending fell 1.5% (-2.7% y/y) but state & local buying increased 2.6% (1.9% y/y).

The increased subtraction from GDP growth due to deterioration in net exports reflected a 0.9% advance (1.2% y/y) in exports outpaced by a  2.1% gain (5.6% y/y) in imports.

The GDP price index increased a little-changed 1.3%. The personal consumption price index grew 1.3% (0.3% y/y) as a 0.2% easing in the goods price index (-2.9% y/y), paced by a 2.3% decline in durables (-2.1% y/y), was countered by a steady 2.0% rise (1.8% y/y) in services prices. The business fixed investment price index rose 1.2% (0.1% y/y), the first increase since Q4'14. The residential price index gained 3.4% (1.7% y/y), also the first rise in three quarters.

The GDP figures can be found in Haver's USECON and USNA databases; USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2009 $ (%, AR) Q3'15 (Second Estimate) Q3'15 (Advance Estimate) Q2'15 Q1'15 Q3 Y/Y 2014 2013 2012
Gross Domestic Product 2.1 1.5 3.9 0.6 2.2 2.4 1.5 2.2
  Inventory Effect -0.6 -1.4 0.0 0.9 0.1 0.0 0.1 0.1
Final Sales 2.7 3.0 3.9 -0.2 2.1 2.4 1.4 2.1
  Foreign Trade Effect -0.2 -0.0 0.2 -1.9 -0.7 -0.1 0.2 0.2
Domestic Final Sales 2.9 2.9 3.7 1.7 2.8 2.8 1.2 1.9
Demand Components
Personal Consumption Expenditures 3.0 3.2 3.6 1.7 3.2 2.7 1.7 1.5
Business Fixed Investment 2.4 2.1 4.1 1.6 2.2 6.2 3.0 9.0
Residential Investment 7.3 6.1 9.4 10.1 8.2 1.8 9.5 13.5
Government Spending 1.7 1.7 2.6 -0.1 0.7 -0.6 -2.9 -1.9
Chain-Type Price Index
GDP      1.3 1.2 2.1 0.1 0.9 1.6 1.6 1.8
Personal Consumption Expenditures 1.3 1.2 2.2 -1.9 0.3 1.4 1.4 1.8
 Less Food/Energy 1.3 1.3 1.9 1.0 1.3 1.5 1.5 1.9
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