3Q2013 Gross Domestic Product: Third (Final) Estimate

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The Bureau of Economic Analysis (BEA) revised its estimate of 3Q2013 growth in real U.S. gross domestic product (GDP) to a seasonally adjusted and annualized rate of +4.1 percent. That rate was the fastest increase in two years, and considerably higher than the “advance” estimate of 2.8 percent posted roughly 1½ months earlier. All four categories -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX) and government consumption expenditures (GCE) made at least some contribution to 3Q growth. The headline rate exceeded expectations of 3.7 percent; in this revision improvement in the headline growth number came principally from consumption of consumer services and goods, and fixed investment – all other categories were held essentially constant. In the previous revision, virtually all of the revised gain derived from the largest buildup of inventories since 1998. 

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Among the notable details in this revision (from Consumer Metrics Institute):

·   The contribution of consumer expenditures for goods to the headline number increased to 1.03% (up from 0.93% in the prior report).

·   The contribution made by consumer services improved to 0.32% (up from 0.02% previously reported, but still down from 0.53% in the prior quarter).

·   The growth rate contribution from private fixed investments strengthened to 0.89% (up from the 0.81% previously reported, but still down slightly from 0.96% in the prior quarter).

·   Inventories were shown as about the same as previously thought, contributing +1.67% to the headline growth rate (still more than four times the +0.41% contribution during the prior quarter).

·   A very slight contraction in net governmental expenditures subtracted -0.01% from the headline number, with any reported growth occurring exclusively at state and local levels.

·   Exports contributed 0.52% to the overall growth rate, up slightly from the 0.50% previously reported -- but still down materially from the 1.04% reported for the second quarter.

·   And imports now subtracted -0.39% from the headline number (compared to -1.10% during the prior quarter).

·   The annualized growth rate for the "real final sales of domestic product" increased to 2.45% (up from the 2.07% in the previous quarter). This is the BEA's "bottom line" measurement of the economy -- which remains substantially weaker than the headline number because of the ongoing buildup of inventories.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.