Thanks to the upcoming holiday, the Bureau of Economic Analysis released its first revision of the advance quarterly GDP report today — and the new number drops significantly from the figure released less than four weeks ago. Instead of a mediocre 2.5% annualized growth rate in Q3, the US now reports a 2.0% annualized growth rate, which means that we are still not coming up to last year’s stagnant growth levels:
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 2.0 percent in the third quarter of 2011 (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.
That’s a $15 billion difference. What changed? The BEA says that the initial estimates of some key indicators were, well, pretty darned rosy:
The “second” estimate of the third-quarter increase in real GDP is 0.5 percentage point, or $15.0 billion, lower than the advance estimate issued last month, primarily reflecting downward revisions to private inventory investment, to nonresidential fixed investment, and to personal consumption expenditures that were partly offset by a downward revision to imports.
It’s not unusual for the BEA and its parent Commerce Department to make tweaks to these numbers. That’s why we have a second and third quarterly GDP statement, so that additional data can offer a clearer view of economic activity. However, the initial figure missed the mark by more than just a tweak, and it’s not the first time that we’ve seen a significant downward revision in the GDP release in subsequent restatements.
Reuters prefers the rosy view:
The U.S. economy grew at a slightly slower pace than previously estimated in the third quarter, but weak inventory accumulation amid sturdy consumer spending strengthened views output would pick up in the current quarter.
“Slightly”? That’s not a slight adjustment; it’s a significant downgrade in output. Furthermore, it seems that Reuters didn’t bother to read the “revisions” section of the new statement, where the BEA noted that they had to revise “personal consumption expenditures” — in other words, “consumer spending” — downward. The new numbers look anything but “sturdy”:
Real personal consumption expenditures increased 2.3 percent in the third quarter, compared with an increase of 0.7 percent in the second. Durable goods increased 5.5 percent, in contrast to a decrease of 5.3 percent. Nondurable goods decreased 0.6 percent, in contrast to an increase of 0.2 percent. Services increased 2.9 percent, compared with an increase of 1.9 percent. …
Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 1.5 percent in the third quarter, compared with an increase of 1.0 percent in the second.
Was Q3 better than Q2? Sure, but that’s a low bar, since Q2’s GDP growth rate was 1.3%, barely above recessionary level. It’s not that much better, as these numbers show, and the new Q3 number is still below the stagnation levels of the “Recovery Summer” and fall of 2010.