Q3 GDP estimate rises to 2.7% — on gov’t spending

posted at 9:41 am on November 29, 2012 by Ed Morrissey

When I wrote about the advance estimate from the Commerce Department on Q3 GDP hitting 2.0%, some commenters warned that the report — which came out just before the election — would be sharply revised after it.  They were right, although the revision went in the opposite direction they suspected.  The revised Q3 GDP number jumped upward to 2.7%, the best quarter of the year, although still substantially a stagnation number, especially when one sees the source of the growth:

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 2.7 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the “second” estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 1.3 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.  In the advance estimate, the increase in real GDP was 2.0 percent (see “Revisions” on page 3).

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, federal government spending, residential fixed investment, and exports that were partly offset by negative contributions from nonresidential fixed investment and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, increased slightly.

Actually, though, the numbers aren’t quite that good internally.  Growth in consumer spending was only 1.4%, although durable goods spending rose 8.7%.  Exports of goods and services only went up 1.1%.  Real final sales of domestic product — the actual growth in end-user spending, as opposed to inventory growth — went up just 1.9%.

So what did go up?  Government spending, emphasis mine:

Real federal government consumption expenditures and gross investment increased 9.5 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second.  National defense increased 12.9 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a  decrease of 0.4 percent.  Real state and local government consumption expenditures and gross  investment decreased 0.4 percent, compared with a decrease of 1.0 percent.

Even Reuters couldn’t muster up much enthusiasm for these numbers:

Gross domestic product expanded at a 2.7 percent annual rate, the Commerce Department said on Thursday, as faster inventory accumulation and export growth offset weak consumer spending and the first drop in business investment in more than a year.

While the growth pace was much quicker than the 2.0 percent rate the government estimated last month and the best since the fourth quarter of 2011, it was hardly a sign of strength in the economy given the boost from restocking and weaker consumer spending.

That will likely be lost in the fourth quarter and inventories may be a drag on growth, which is already being weighed down by fears of austerity, known as the fiscal cliff.

In other economic news, the rate of new jobless claims returned to its 18-month level as the effects of Hurricane Sandy dissipated:

In the week ending November 24, the advance figure for seasonally adjusted initial claims was 393,000, a decrease of 23,000 from the previous week’s revised figure of 416,000. The 4-week moving average was 405,250, an increase of 7,500 from the previous week’s revised average of 397,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending November 17, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 17 was 3,287,000, a decrease of 70,000 from the preceding week’s revised level of 3,357,000. The 4-week moving average was 3,296,250, an increase of 6,250 from the preceding week’s revised average of 3,290,000.

The data table at the end shows the major decreases in state numbers from the previous reporting week, which is dominated by Sandy states — except for California, whose decrease in new claims goes unexplained.  Basically, the two reports indicate that the stagnation status quo continues.


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So they cooked the books

tomas on November 29, 2012 at 9:44 AM

Smell that recovery!

*whiff whiff*

Yep, like effin ROSES, baby.

Bishop on November 29, 2012 at 9:45 AM

Send Susan Rice out to tell us how good this is.

Electrongod on November 29, 2012 at 9:45 AM

Well the people voted for this

Status quo rocks
/

cmsinaz on November 29, 2012 at 9:45 AM

Explaining California, it had a +24K spike the prior week (week-ending 11/10), blamed on the service industry.

Steve Eggleston on November 29, 2012 at 9:47 AM

Ed, did you check their math? They’ve been using annualized deflaters to increase the number.

http://www.consumerindexes.com/

from the october analysis:

For this set of revisions the BEA assumed annualized net aggregate inflation of 2.89%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a substantially higher 4.98% annualized inflation rate. As a reminder: an understatement of assumed inflation improves the reported headline number — and in this case the BEA’s low “deflater” (more than 2% below the CPI-U) significantly boosted the published headline rate. If the CPI-U had been used to convert the “nominal” GDP numbers into “real” numbers, the reported headline would have shown an economy contracting at a -0.02% rate.

Contracting at a -0.02% <<< This is why I've been saying the numbers are fake. Because they are fake. We are not in a recovery.

dogsoldier on November 29, 2012 at 9:51 AM

No wonder Obama and the Dems are so desperate for “new revenue”. They can’t keep this house of cards propped up much longer without it.

Doughboy on November 29, 2012 at 9:54 AM

The CPI-U hasn’t been released yet, but all indications are that it increased, which means the real GDP is still at or below zero.

dogsoldier on November 29, 2012 at 10:00 AM

dogsoldier on November 29, 2012 at 9:51 AM

You have done a great service heree. I am forwarding this info to several tea party organizations and other equally cranky groups.

If you would have told me when I was a kid that decent bread would be $5 a loaf, I’d have told you you were nuts. If you’d have told me that I’d be paying it during the presidency of an idiot like this, I don’t know what I would have done.

I miss my youth for so many reasons.

platypus on November 29, 2012 at 10:03 AM

I miss my youth for so many reasons.

platypus on November 29, 2012 at 10:03 AM

Take heart. To fix problems we have to know their true scope. Remember, we put a bunch of guys on the moon. We can fix this.

dogsoldier on November 29, 2012 at 10:06 AM

Basically, the two reports indicate that the stagnation status quo continues.

And will continue to do so for the next four years.

rbj on November 29, 2012 at 10:10 AM

Take heart. To fix problems we have to know their true scope. Remember, we put a bunch of guys on the moon. We can fix this.

dogsoldier on November 29, 2012 at 10:06 AM

No we didn’t. We’re the generation that mothballed NASA. The folks who put men on the moon are long gone.

Doughboy on November 29, 2012 at 10:11 AM

No we didn’t. We’re the generation that mothballed NASA. The folks who put men on the moon are long gone.

Doughboy on November 29, 2012 at 10:11 AM

Hang on there! I’m from that generation, and I ain’t gone yet. A lot of my contemporaries are still around too. No jokes about walkers!

dogsoldier on November 29, 2012 at 10:20 AM

Q3 GDP estimate rises to 2.7% — on gov’t spending

Chaos Theory states that all ordered structures appear to be disordered when viewed from the correct position. When viewed from the correct position, even the car in this video seems to be expanding

SWalker on November 29, 2012 at 10:27 AM

No jokes about walkers!

dogsoldier on November 29, 2012 at 10:20 AM

o_O

SWalker on November 29, 2012 at 10:28 AM

Contracting at a -0.02% <<< This is why I've been saying the numbers are fake. Because they are fake. We are not in a recovery.

dogsoldier on November 29, 2012 at 9:51 AM

Homophobe.

Bishop on November 29, 2012 at 10:33 AM

Remember, we put a bunch of guys on the moon.

dogsoldier on November 29, 2012 at 10:06 AM

I can think of a few I would like to send there today. Purely scientific stuff, of course.

STL_Vet on November 29, 2012 at 10:34 AM

New unemployment claims under 400k until they revise them next week? Woohoo, where’s the champagne?

forest on November 29, 2012 at 10:47 AM

the stagnation status quo continues.

Might as well shorten it to the stagnation quo, since we may be using the phrase a lot

tom on November 29, 2012 at 10:48 AM

SWalker on November 29, 2012 at 10:27 AM
Bishop on November 29, 2012 at 10:33 AM
Electrongod on November 29, 2012 at 9:45 AM
cmsinaz on November 29, 2012 at 9:45 AM

Morning all!!

dogsoldier on November 29, 2012 at 10:06 AM

I like you… :-)

I just don’t trust any entity any longer to tell the frigging truth.

My 2C worth this mornin’…

Bit slow getting warmed up, mentally :-)

Scrumpy on November 29, 2012 at 10:51 AM

Scrumpy on November 29, 2012 at 10:51 AM

Morning Scrumpy… —-> Passes Scrumpy some high octane coffee, this will help dear… ;)

SWalker on November 29, 2012 at 10:57 AM

SWalker on November 29, 2012 at 10:57 AM

On my 2nd cuppa ! Cheers!

Scrumpy on November 29, 2012 at 11:01 AM

I hope there’s only 4 more years of this crapola. Nixon was rumored to be seeking a 3rd term after his reelection. That thing in the WH may be thinking the same. If so, I hope it ends as well as Nixon’s…

RedInMD on November 29, 2012 at 11:04 AM

I can think of a few I would like to send there today. Purely scientific stuff, of course.

STL_Vet on November 29, 2012 at 10:34 AM

Breath holding experiments, hard vacuum survivability, long-term exposure to radiation…yes, purely scientific.

Bishop on November 29, 2012 at 11:04 AM

STL_Vet on November 29, 2012 at 10:34 AM

Breath holding experiments, hard vacuum survivability, long-term exposure to radiation…yes, purely scientific.

Bishop on November 29, 2012 at 11:04 AM

Can I volunteer Nancy (The Wicked Witch of the West) Pelosi and Harry (The Bugger King) Reid for those experiments? Please… Pretty Please….

SWalker on November 29, 2012 at 11:10 AM

Happy days are here again!

sandee on November 29, 2012 at 11:15 AM

Welcome to your lost decade. thank you sir, may I have another?!

/end snark

can_con on November 29, 2012 at 11:18 AM

So what did go up? Government spending

Wow. I heard the 2.7% number on the radio this morning (my rental car does not have XM, so I was forced to listen to public radio). The number sounded too good to be true… I knew there had to be more to the story, and as usual, Ed Morrissey provides an excellent analysis.

They were talking about how things are moving in the right direction, and the recovery is taking shape, albeit slowly. I guess I’ve been insulated from the left-wing MSM for a while, but I was pretty surprised at how they glossed over the number and did not provide any analysis, they just took it at face value.

MSM sucks.

UltimateBob on November 29, 2012 at 11:26 AM

Nixon was rumored to be seeking a 3rd term after his reelection. That thing in the WH may be thinking the same.

RedInMD on November 29, 2012 at 11:04 AM

Which thing in the WH? The (beta) male or one of the more dominant females?

UltimateBob on November 29, 2012 at 11:29 AM

If government spending is considered part of the GDP, then the Soviet Union was wildly economically successful. Why isn’t it around anymore. What happened to it? What went wrong?

farsighted on November 29, 2012 at 11:29 AM

and gross investment

The government doesn’t invest anything at all. It confiscates money from the taxpayer at the end of a gun and then blows it lagely on BS, like a crack addled stripper.

CorporatePiggy on November 29, 2012 at 11:35 AM

Along with some other numbers our government generates, like unemployment and inflation, the GDP will be increasingly out of touch with reality the more government spending it includes.

The more the government spends the higher the GDP. Right?

The more people stop looking for work or work only part time the lower the unemployment rate. Right?

If you only buy what government bureaucrats calculating the inflation rate buy, and buy it where they buy it and for the price they buy it (one hint, it’s not a sale price), and then factor out what is declared a non-inflationary increase in the price, then inflation will be low. Right?

Welcome to the new era of increasingly out of touch with reality US government statistics. It’s been done before. Every tractor factory in the Soviet Union routinely exceeded its five year plan quota, officially speaking, that is. Every economic five year plan in the Soviet Union was a great success, right up until the end.

farsighted on November 29, 2012 at 11:43 AM

Ed,
Posted this on Erika’s entry yesterday but I think it was late and the thread died. Sure like to see some discussion here….

Erika, et al.,
I’ve done some very simple number crunchng using the data in the below website. Granted, numbers only available there through 2016.

With my simple math skills (and albeit lack of an accounting degree) it looks like Social Security not only is in the black, but produces revenue in excess of expenditures, and with a minor 2.75%/30 yr Treasury note on the extra alone stays in the black through 2016.

As I said, nothing is available past 2016, when I expect the charts would show a ballooning retirement surge. It would be interesting to run those numbers though, such that they are. If the results are anywhere near what I am seeing there is some very funny stuff being done somewhere.

Of course given the past record of not only the Administration but the Congress on just the Unemployment reporting alone, I am not surprised.

“http://www.usgovernmentspending.com/federal_budget_detail_fy12bs12012n#usgs302″

I recall in the movie Dave where his accounting bud sits down with the budget and cranks out something workable. Wonder how a few tries by the ahem, unwashed, at balancing the actual Federal monstrosity would turn out. It could not be any worse than it is.

Tenwheeler on November 29, 2012 at 11:54 AM

except for California, whose decrease in new claims goes unexplained.

California has discovered, “If you don’t report it, it didn’t happen!”

GarandFan on November 29, 2012 at 12:29 PM

So what drove “growth” in Q3? Nothing short of the most hollow and worst components of GDP: Government Spending, which soared to 0.67% of the annualized number, the first positive print in years, and of course, Inventories, which were responsible for 30% of the headline number. Finally, and most importantly, Fixed Investment, aka CapEx, was a meager 0.1%, or the lowest GDP contribution since Q1 2011. Without CapEx there is no corporate revenue growth (and future hiring intentions) period.

Question: When inflating the money supply, you debase the value of the currency, meaning that it will take more dollars to buy the same thing q/q. That sure does look like “growth” doesn’t it? More dollars chasing goods? But not when those dollars are BUYING LESS.

Do I have that right?

tom daschle concerned on November 29, 2012 at 2:18 PM

Do I have that right?

tom daschle concerned on November 29, 2012 at 2:18 PM

That’s why its so important to keep that government published inflation number low, too. IIRC, GDP calculations are supposed to be adjusted for (real) inflation.

farsighted on November 29, 2012 at 2:21 PM

It’s all very simple.

Obama: America on Hold.

tech_sass on November 29, 2012 at 3:11 PM

I like you… :-)

I just don’t trust any entity any longer to tell the frigging truth.

My 2C worth this mornin’…

Bit slow getting warmed up, mentally :-)

Scrumpy on November 29, 2012 at 10:51 AM

Thank you!

I stopped trusting them when Jimmy Carter decided to change the way inflation is calculated because it didn’t favor him. So I started looking at all the data as “political.”

dogsoldier on November 29, 2012 at 6:04 PM

If you would have told me when I was a kid that decent bread would be $5 a loaf, I’d have told you you were nuts. If you’d have told me that I’d be paying it during the presidency of an idiot like this, I don’t know what I would have done.

I miss my youth for so many reasons.

platypus on November 29, 2012 at 10:03 AM

Thirty years or so ago, I started wondering what was holding this entire house of cards together. Back then I would never had guessed that things would actually be this good in 2012…that our Republic would have been completely subverted and taken over by the Socialists and well-off elitists by now.

If it’s that much of a struggle for them, perhaps there is hope for us after all.

Dr. ZhivBlago on November 29, 2012 at 7:57 PM

Obummer’s minions have given out fake numbers for so long now that’s there’s probably no way to know what the truth is any more – unless we elect a Republican president somewhere in the future.

sherrimae on November 30, 2012 at 12:47 AM

Obummer’s minions have given out fake numbers for so long now that’s there’s probably no way to know what the truth is any more – unless we elect a Republican president somewhere in the future.

sherrimae on November 30, 2012 at 12:47 AM

When a Republican gets elected you may rely upon the media to publish the real data, in 72 size font.

dogsoldier on November 30, 2012 at 7:44 AM