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Economy in Brief

Small Upward Revision to Q3 U.S. GDP
by Sandy Batten  November 24, 2021

• GDP growth revised up to 2.1% q/q SAAR from 2.0%.

• Numerous small revisions across major expenditure categories.

• Price inflation revised up to second fastest quarterly rate in 20 years.

• Corporate profits rose a solid 4.3% q/q in Q3 on top of Q2 surge.

Real GDP growth in Q3 2021 was revised up slightly to 2.1% q/q SAAR from the initially reported 2.0% and still down markedly from the 6.7% increase in Q2. The Action Economics Forecast Survey had looked for a 2.2% quarterly gain. Compared to a year ago, GDP grew 4.9% in Q3, the same as in the advance report.

Today's report contained the first estimate of Q3 corporate profits. They rose a solid 4.3% q/q (not annualized) on top of a 10.5% surge in Q2 and were up 20.7% from a year ago. Profits of domestic industries rose 3.5% q/q in Q3 after a 13.1% jump in Q2. Profits from abroad increased 8.7% q/q, their first quarterly gain in three quarters.

A significant slowdown in personal consumption expenditures was still the major determinant of the Q3 slowdown in overall GDP growth. Although PCE growth was revised up slightly to 1.7% from 1.6%, its sharp slowdown from 12.0% in Q2 more than accounted for the slowdown in overall GDP growth. A deep decline in spending on durable goods (revised up slightly to -24.4% from -26.2%) led the slowdown in overall PCE.

Business fixed investment was revised down to 1.5% q/q SAAR from 1.8% in the advance report. This reflected small upward revisions to structures and spending on equipment (both smaller declines than initially reported) and a more meaningful downward revision to spending on intellectual property products (+9.3% from +12.2% initially). The initially reported decline in inventories was revised slightly smaller such that their contribution to overall GDP growth was revised up marginally to 2.13%-points from 2.07%-points.

The initially reported 7.7% q/q decline in residential investment was revised lower to an 8.3% drop. This was the second quarterly decline after this category had been one of the growth leaders in the earlier stages of the post-lockdown rebound.

The drop in exports in Q3 was revised even larger to -3.0% q/q from -2.5%. The rise in imports was revised down to 5.8% from 6.1%. As a result the trade deficit was revised slightly wider and it subtracted slightly more from overall GDP growth than previously estimated (-1.16%-points versus -1.14%-points).

Government outlays growth was revised up slightly (+0.9% versus+0.8%) with the initially reported decline in Federal government expenditures revised even lower (-4.9% versus -4.7%) and the initially reported 4.4% increase in spending by state and local governments revised up to 4.7%.

Inflation as measured by the indexes in this report remained elevated. The initially reported 5.7% q/q SAAR increase (4.6% y/y) was revised up to 5.9%. Apart from the 6.1% q/q increase in Q2, this was the faster pace of quarterly inflation since Q4 1981. PCE price inflation continued to be a major factor behind elevated overall inflation although the initially reported 5.3% q/q Q3 rise in this index was not revised. The increase in prices of nonresidential fixed investment was revised up slightly to 4.3% from 4.2% and prices of residential investment was revised up to a 14.4% q/q gain from 14.0%. This was the third consecutive quarter in which prices of residential investment posted double-digit increases. The 9.5% initially reported increase in export prices was revised up to 9.8% and the 5.9% gain in import prices was revised up slightly to 6.0%. Prices paid by governments rose an upwardly revised 6.0% from 5.4% initially, reflecting a meaningful upward revision to prices paid by state and local governments (6.7% versus 5.9% initially).

The GDP figures can be found in no Haver's USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2012 $ (%, AR) Q3'21 (2nd est) Q3'21 (Adv est) Q2'21 Q1'21 Q3'21 Y/Y 2020 2019 2018
Gross Domestic Product 2.1 2.0 6.7 6.3 4.9 -3.4 2.3 2.9
  Inventory Effect (% point) 2.1 2.1 -1.3 -2.6 1.2 -0.5 0.1 0.1
Final Sales 0.0 -0.1 8.1 9.1 5.1 -2.9 2.2 2.8
  Foreign Trade Effect (% point) -1.2 -1.1 -0.2 -1.6 -1.0 -0.4 -0.2 -0.2
Domestic Final Sales 1.1 1.0 8.0 10.4 6.1 -2.5 2.4 3.0
Demand Components
  Personal Consumption Expenditure 1.7 1.6 12.0 11.4 7.0 -3.8 2.2 2.9
  Nonresidential Fixed Investment 1.5 1.8 9.2 12.9 9.0 -5.3 4.3 6.4
  Residential Investment -8.3 -7.7 -11.7 13.3 5.4 6.8 -0.9 -0.6
  Government Spending 0.9 0.8 -2.0 4.2 0.6 2.5 2.2 1.4
Chain-Type Price Index
   GDP 5.9 5.7 6.1 4.3 4.6 1.3 1.8 2.4
    Personal Consumption Expenditure 5.3 5.3 6.5 3.8 4.3 1.2 1.5 2.1
    Less Food & Energy 4.5 4.5 6.1 2.7 3.6 1.4 1.7 2.0
    Nonresidential Investment 4.3 4.2 0.9 0.8 1.5 0.6 1.3 0.8
    Residential Investment 14.4 14.0 15.3 12.4 12.0 3.3 2.9 5.6
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