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.