It’s not much of an improvement, but it does push the Q3 economic results a little more into the lane of benign stagnation than the initial estimate from Bureau of Economic Analysis. In its second estimate, the BEA found less inventory drag and somewhat better business investment in the data, but 2.1% doesn’t exactly indicate a booming marketplace either:
The upward revision to the percent change in real GDP primarily reflected an upward revision to private inventory investment that was partly offset by downward revisions to PCE and to exports. …
For the second quarter of 2015, real GDI was revised up 1.5 percentage points, from 0.7 percent to 2.2 percent, primarily reflecting an upward revision to private wages and salaries based on newly available second-quarter tabulations from the BLS quarterly census of employment and wages.
Gross private domestic investment still came in on the negative side, but only at -0.3%, not the -5.6% in the previous estimate. That’s a fairly significant miss by BEA, and paints at least a somewhat better picture, or at least less bad. Most of the decline came in non-residential structures and intellectual property, while equipment sales picked up considerably. Still, a -0.3% doesn’t sound a confident note about the coming quarter; even with the upward revision, it’s the worst result in almost two years.
Reuters also warns that inventory accumulation might be a portent of leaner times:
The U.S. economy grew at a healthier clip in the third quarter than initially thought, but strong inventory accumulation by businesses could temper expectations of an acceleration in growth in the final three months of the year.
The Commerce Department on Tuesday said the nation’s gross domestic product grew at a 2.1 percent annual pace, not the 1.5 percent rate it reported last month. It said efforts by businesses to reduce an inventory bloat had not been as aggressive as previously believed. …
Businesses accumulated $90.2 billion worth of inventories in the third quarter, instead of the $56.8 billion reported last month. Businesses amassed more than $100 billion worth of inventories in each of the prior two quarters.
As a result, the change in inventories chopped off 0.59 percentage point from third-quarter GDP growth, rather than the 1.44 percentage points the government reported in October.
That, however, suggests inventories could be a drag on fourth-quarter growth.
The Associated Press takes a somewhat dimmer view of the report:
The U.S. economy grew at a slightly faster rate in the summer than previously reported, mainly because businesses restocked their goods at a stronger pace than first thought.
The overall economy, as measured by the gross domestic product, grew at an annual rate of 2.1 percent in the July-September period, the Commerce Department reported Tuesday. It previously estimated growth of 1.5 percent.
Even with the revision, economic growth slowed sharply from a 3.9 percent gain in the second quarter. The economy then was rebounding from a harsh winter that had sapped first quarter growth to a barely discernible 0.6 percent pace.
Reuters lauds the consumer demand in this estimate, but the AP notes that PCEs are actually down 0.5 points from Q2 at 3.0%. That’s also lower than the final three quarters of 2014. It’s too early to say it’s slowing in any appreciable sense, but if it doesn’t pick up in Q4, then it may signal more weakness than even this wan result would suggest.