Second look at third-quarter GDP: +3.6%

posted at 9:41 am on December 5, 2013 by Steve Eggleston

Last month, the advance estimate for the third quarter GDP was a 2.8% annualized increase. Today, the second of three revisions was released, and the topline news was, in a word, stunning:

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 3.6 percent in the third quarter of 2013 (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 2.5 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 2.8 percent (see “Revisions” on page 3). With this second estimate for the third quarter, the increase in private inventory investment was larger than previously estimated.

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

The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an acceleration in state and local government spending that were partly offset by decelerations in exports, in PCE, and in nonresidential fixed investment.

Looking over the details, it wasn’t quite as impressive. The acceleration in real GDP growth was entirely due to a massive increase in inventories – their contribution to the GDP growth went from 0.83 percentage points in the first look to 1.68 percentage points. As Tom Blumer said, “The increase is nice, if the inventories which were created get sold without deep discounting. The prospects for that don’t look good, based on early Christmas shopping season results.”

Reuters was similarly unimpressed:

The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish.

Gross domestic product grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department said on Thursday. Economists polled by Reuters had expected output would be revised up to only a 3.0 percent rate.

The third-quarter pace is the fastest since the first quarter of 2012 and marked an acceleration from the April-June period’s 2.5 percent rate.

Businesses accumulated $116.5 billion worth of inventories, the largest increase since the first quarter of 1998. That compared to prior estimates of only $86 billion.

Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011.

The contribution from inventories had previously been estimated at 0.8 percentage point. Stripping out inventories, the economy grew at a 1.9 percent rate rather than the 2.0 percent pace estimated last month.

Meanwhile, the Thanksgiving holiday had a hand in dropping the initial jobless claims the week ending 11/30 down to a seasonally-adjusted 298,000. Reuters broke out the “unexpectedly” word for that bit of news as the economists they polled expected that number to come in at 325,000.

One group that didn’t see either item as unqualified good news is the investor class. CNBC explains in a 8:36 am Eastern item:

U.S. stock index futures retained tepid gains on Thursday after economic reports had the economy growing more than expected in the third quarter, with investors nervous that a strong jobs report on Friday could provoke a 2013 start to the Federal Reserve’s tapering off of its stimulus program.

As I type this just after 9 am Eastern, those gains turned negative outside the NASDAQ composite index.


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Black Friday to the rescue!!

//

Gatsu on December 5, 2013 at 9:48 AM

Christmas bonuses for everyone.

oldroy on December 5, 2013 at 9:50 AM

Fewer people working, fewer people to lay off.

Shamelessly ripped from ZH commenter NoDebt

Murphy9 on December 5, 2013 at 9:50 AM

Fewer people working, fewer people to lay off.

Shamelessly ripped from ZH commenter NoDebt

Murphy9 on December 5, 2013 at 9:50 AM

I’ve been musing that on and off since August when the average weekly jobless claims dropped to 325K with no appreciable effect on the jobs numbers.

Steve Eggleston on December 5, 2013 at 9:52 AM

Just like the Soviet Union, record production of steel I-beams which were then placed in huge outdoor depots and left to rust. Years later they would be salvaged, melted down, and recast which produced another record.

Bishop on December 5, 2013 at 9:54 AM

Throw your employees to the exchanges and spend the savings on some new trucks.

Akzed on December 5, 2013 at 9:54 AM

No labor force participation rate data?

Murphy9 on December 5, 2013 at 9:55 AM

No labor force participation rate data?

Murphy9 on December 5, 2013 at 9:55 AM

Said no democrat voter ever….

Murphy9 on December 5, 2013 at 9:56 AM

The acceleration in real GDP growth was entirely due to a massive increase in inventories – their contribution to the GDP growth went from 0.83 percentage points in the first look to 1.68 percentage points. As Tom Blumer said, “The increase is nice, if the inventories which were created get sold without deep discounting. The prospects for that don’t look good, based on early Christmas shopping season results.”

So basically we’ll have a bunch of overstocked companies and retailers heading into 2014.

Doughboy on December 5, 2013 at 9:57 AM

Well the morning joe crew were very impressed, natch…

They are hoping for a great low unemployment number to go with this

cmsinaz on December 5, 2013 at 9:58 AM

No labor force participation rate data?

Murphy9 on December 5, 2013 at 9:55 AM

That’s tomorrow, and judging by Gallup’s full-time/adult-only numbers, it should be quite disappointing.

Steve Eggleston on December 5, 2013 at 9:58 AM

Conservatives obviously don’t understand the ecomony.

Axe on December 5, 2013 at 9:59 AM

Well the morning joe crew were very impressed, natch…

They are hoping for a great low unemployment number to go with this

cmsinaz on December 5, 2013 at 9:58 AM

That’s the difference between the MSDNC and CNBC crews. Even designated cheerleader Steve Liesman was less-than-impressed over on CNBC.

Rick Santelli said to get a photo of these numbers because they’re not going to be repeated in the near future.

Steve Eggleston on December 5, 2013 at 10:00 AM

Steve Eggleston

thanks for the breakdown. Markets been down 3-4 days in a row I think. Also heard job numbers for unemployment was under 200K.

Never fear though, WH and Ds are pushing for another extention of unemployment insurance.

From a friend: “Democrats Hold Hearing on Unemployment Benefits

The Democratic Steering Committee holds a hearing on unemployment insurance (UI). An extension of UI is set to expire at the end of the year, and the committee says that 1.3 million Americans will be affected unless Congress acts.

Live at 10:30am (ET) on C-SPAN3

Put another way, the Porkulus extension of unemployment benefits from 26 weeks to 100 weeks is about to expire.”

CoffeeLover on December 5, 2013 at 10:01 AM

So basically we’ll have a bunch of overstocked companies and retailers heading into 2014.

Doughboy on December 5, 2013 at 9:57 AM

On the bright side all those leeches will be able to get a cheap LED tv while simultaneously whining that their EBT card has been maxed out because of their cigarette habit.

Bishop on December 5, 2013 at 10:04 AM

They are hoping for a great low unemployment number to go with this

cmsinaz on December 5, 2013 at 9:58 AM

Hoping for low unemployment based on what, fairy dust?

That’s the whole problem with the country right now. Too much hoping and not enough making it happen. So, we spend future generations into economic purgatory- hoping that nobody notices until after the next election. We launch a massive new government program- hoping that the website that crashes with six people can handle hundreds of thousands a day.

Nobody wants unemployment to go up but simply hoping that more people found jobs last month isn’t really a great strategy either.

Happy Nomad on December 5, 2013 at 10:05 AM

thanks for the breakdown. Markets been down 3-4 days in a row I think. Also heard job numbers for unemployment was under 200K.

Never fear though, WH and Ds are pushing for another extention of unemployment insurance.

From a friend: “Democrats Hold Hearing on Unemployment Benefits

The Democratic Steering Committee holds a hearing on unemployment insurance (UI). An extension of UI is set to expire at the end of the year, and the committee says that 1.3 million Americans will be affected unless Congress acts.

Live at 10:30am (ET) on C-SPAN3

Put another way, the Porkulus extension of unemployment benefits from 26 weeks to 100 weeks is about to expire.”

CoffeeLover on December 5, 2013 at 10:01 AM

I’m just filling in while Ed’s out on family business. The consensus on the jobs report was, at least before ADP’s surprise positive report (covered by Ed), +180K.

My prediction on the extended funemployment – the GOP will cave once again.

Steve Eggleston on December 5, 2013 at 10:07 AM

As I type this just after 9 am Eastern, those gains turned negative outside the NASDAQ composite index.

Well remember, thanks to this assnine QEternity policy that we have… “good news” (as in news that will drive Fed decisions to taper-geddon) is “bad news” for investors. As soon as the economy turns around and starts actually working again, the Fed is going to cut off the liquidity addicts and then ….

All hell on the equities market.

Defenestratus on December 5, 2013 at 10:09 AM

Looking over the details, it wasn’t quite as impressive. The acceleration in real GDP growth was entirely due to a massive increase in inventories – their contribution to the GDP growth went from 0.83 percentage points in the first look to 1.68 percentage points.

If it sells, bifurcation continues. America is, I suspect, becoming a McDLT.

–which was delicious, by the way.

Put another way, the Porkulus extension of unemployment benefits from 26 weeks to 100 weeks is about to expire.”

CoffeeLover on December 5, 2013 at 10:01 AM

Insane. Why not make it “indefinite,” have done.

Axe on December 5, 2013 at 10:10 AM

Correction on Job Numbers: sorry 298K actual vs 325K est. I guess I need to put my glasses on and hearing aide in.

CoffeeLover on December 5, 2013 at 10:10 AM

Hoping for low unemployment based on what, fairy dust?

That’s the whole problem with the country right now. Too much hoping and not enough making it happen. So, we spend future generations into economic purgatory- hoping that nobody notices until after the next election. We launch a massive new government program- hoping that the website that crashes with six people can handle hundreds of thousands a day.

Nobody wants unemployment to go up but simply hoping that more people found jobs last month isn’t really a great strategy either.

Happy Nomad on December 5, 2013 at 10:05 AM

Fairy dust and less-than-scrupulous Census workers, but mostly unscrupulous Census workers.

Steve Eggleston on December 5, 2013 at 10:10 AM

Bqhatevwr. I really don’t trust anything coming out of the government under this regime.

forest on December 5, 2013 at 10:12 AM

Steve Eggleston on December 5, 2013 at 10:07 AM

That is so nice of you. I’ll take explanation of the financials/economy any time I can find it where I understand it. You did a great job. Thanks again.

CoffeeLover on December 5, 2013 at 10:13 AM

These are great numbers. So great that it might be time to let unemployment extensions expire and to taper the Federal Reserve’s bond buying program.

Mike Honcho on December 5, 2013 at 10:16 AM

Fairy dust and less-than-scrupulous Census workers, but mostly unscrupulous Census workers.

Steve Eggleston on December 5, 2013 at 10:10 AM

I’ve lived in DC for a good portion of my life and I’ve never seen the books cooked to this level. And so blatantly.

Census workers manipulating jobs numbers. Budget offices using wildly “optimistic” rates of growth to hide the true cost of Obamacare. The IRS deliberately targeting conservative groups. State Department slow rolling on the Keystone pipeline over minor issues…… It’s bad.

Happy Nomad on December 5, 2013 at 10:17 AM

Bqhatevwr. I really don’t trust anything coming out of the government under this regime.

forest on December 5, 2013 at 10:12 AM

Then I invite you to click the “unscrupulous Census workers” link just above your comment.

Steve Eggleston on December 5, 2013 at 10:19 AM

Steve…so true

cmsinaz on December 5, 2013 at 10:19 AM

These are great numbers. So great that it might be time to let unemployment extensions expire and to taper the Federal Reserve’s bond buying program.

Mike Honcho on December 5, 2013 at 10:16 AM

What? And retard all the great economic progress that we’ve had since 2009? Remember, paying the 99ers isn’t really welfare. It is an economic stimulus program.

Happy Nomad on December 5, 2013 at 10:20 AM

Yepper HN

cmsinaz on December 5, 2013 at 10:21 AM

I believe nothing coming from this Administration, nothing. They have proven over and over again that they simply can’t be trusted to not fiddle with the numbers.

Johnnyreb on December 5, 2013 at 10:31 AM

considering O is taking a beating on Obamacare and just about everything else and their track record for misleading and changing things to suit their political purposes…..add me to the list of not trusting anything govt. is putting out right now.

CoffeeLover on December 5, 2013 at 10:34 AM

What? And retard all the great economic progress that we’ve had since 2009? Remember, paying the 99ers isn’t really welfare. It is an economic stimulus program.

Happy Nomad on December 5, 2013 at 10:20 AM

Funny you mention 2009. ZeroHedge notes that the personal consumption contribution to the real GDP change (+0.96 percentage points, and that is on an annualized, inflation-adjusted basis) is the lowest since the 3rd quarter of 2009.

Steve Eggleston on December 5, 2013 at 10:36 AM

I’m just filling in while Ed’s out on family business. The consensus on the jobs report was, at least before ADP’s surprise positive report (covered by Ed), +180K.

My prediction on the extended funemployment – the GOP will cave once again.

Steve Eggleston on December 5, 2013 at 10:07 AM

fwiw you’ve always seemed to do an excellent job and I thank you.
so do the evil rt wingers pay you or are you just an intern?
HAHAHAH :)

dmacleo on December 5, 2013 at 10:39 AM

As I type this just after 9 am Eastern, those gains turned negative outside the NASDAQ composite index.

The disconnect between wallstreet and the economy – due to QE – is amazing.

If the economy sucks –> more QE –> higher equity prices.

If the economy shows signs of lefe –> less QE –> lower equity prices.

We live in bizarre times.

Deafdog on December 5, 2013 at 10:40 AM

And why should I believe any of these numbers?

I mean the President needs good news and a change in topics, so isn’t this just a bureaucrat delivering on that need?

It’s odd how this coincides with the latest pivot to the economy. It’s like it was planned or something.

strickler on December 5, 2013 at 10:53 AM

fwiw you’ve always seemed to do an excellent job and I thank you.
so do the evil rt wingers pay you or are you just an intern?
HAHAHAH :)

dmacleo on December 5, 2013 at 10:39 AM

You’re welcome. I’m just filling in early-mornings for a little while while allowing dust to reaccumulate back on my blog.

Steve Eggleston on December 5, 2013 at 10:54 AM

Fewer people working, fewer people to lay off.

Shamelessly ripped from ZH commenter NoDebt

Murphy9 on December 5, 2013 at 9:50 AM

Quite alright to spread the truth.
I’ve been saying this some time.
Just to give an example, a local company had a major lay-off in 2009 and continued to lay-off in dribs and drabs after that. Workers that left of their own accord weren’t ever replaced. The place is down to a skeleton crew so how many are left to let go?
The only thing that remains to do seems to be to just close the place up.

lynncgb on December 5, 2013 at 11:01 AM

You’re welcome. I’m just filling in early-mornings for a little while while allowing dust to reaccumulate back on my blog.

Steve Eggleston on December 5, 2013 at 10:54 AM

That’s not dust. Those are sloughed brain cells. :) You get that what with smartness and the thinking of things.

. . . though, I have to admit some of the impressed wonder is gone now that I know you use calculators from the interwebs.

The disconnect between wallstreet and the economy – due to QE – is amazing.

If the economy sucks –> more QE –> higher equity prices.

If the economy shows signs of lefe –> less QE –> lower equity prices.

We live in bizarre times.

Deafdog on December 5, 2013 at 10:40 AM

Some ways of “fettering” “capitalism” apparently make it walk funny. :)

Axe on December 5, 2013 at 11:01 AM

I’ve been saying this some time

Saying this for some time.

lynncgb on December 5, 2013 at 11:04 AM

I can not stress how much these numbers are truly a joke. In August of this year, the Department of Labor made some definition changes and accounting changes to their methodology of producing this report. One of those changes was that as of that time, intellectual property became defined as a tangible asset, and got included in the top line GDP number. Literally, this makes any reporting of GDP an absolute farce. Not one gosh darned thing is real, and certainly should not be considered at all until there has been at least one full year of this lunacy in any case. Right now our government, and more specifically the executive branch, is capable of using this bit of chicanery to make the GDP number be anything they want it to be. Believe it if you want to, but I call Bullshit!

Flyovercountry on December 5, 2013 at 11:09 AM

Does anyone believe anything our government says any longer?

bw222 on December 5, 2013 at 11:24 AM

Not one gosh darned thing is real, and certainly should not be considered at all until there has been at least one full year of this lunacy in any case. Right now our government, and more specifically the executive branch, is capable of using this bit of chicanery to make the GDP number be anything they want it to be. Believe it if you want to, but I call Bullshit!

Flyovercountry on December 5, 2013 at 11:09 AM

But chocolate rations have increased!!

Axeman on December 5, 2013 at 12:53 PM

But chocolate rations have increased!!

Axeman on December 5, 2013 at 12:53 PM

From 10 grams to 8.

Steve Eggleston on December 5, 2013 at 1:36 PM

Does anyone believe anything our government says any longer?

bw222 on December 5, 2013 at 11:24 AM

A convenient setup for government shutdown blame to be placed upon the R’s when 4th quarter fails to match.

Carnac on December 5, 2013 at 2:43 PM

Does anyone believe anything our government says any longer?

bw222 on December 5, 2013 at 11:24 AM

0Zombies only

dogsoldier on December 6, 2013 at 5:08 AM