Third Quarter GDP, A Downward Revision
The BEA has released the preliminary (or second estimate) GDP figures for the third quarter. Compared to the advance estimates released at the end of last month, the annual growth rate is down from 3.5 to 2.8 percent.
The second estimate of the third-quarter increase in real GDP is 0.7 percentage point lower, or $23.7 billion, than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to personal consumption expenditures and to nonresidential fixed investment that were partly offset by an upward revision to exports.
Taking stock of where we are, it is clear that the third quarter was heavily influenced by government spending at the federal level. Some highlights:
- Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.
- Real federal government consumption expenditures and gross investment increased 8.3 percent in the third quarter, compared with an increase of 11.4 percent in the second.
- Real state and local government consumption expenditures and gross
investment decreased 0.1 percent, in contrast to an increase of 3.9 percent.
There was something of a rebound in residential fixed investment and equipment and software investment, which is where we would like to see the growth come from in a recovery.
Motor vehicle output
I'm not sure if the surge in motor vehicle output was related to cash for clunkers. See Table 7.2.5B. on Motor Vehicle Output from the BEA. Spending increased from $266.3 billion in 2009Q3to $277.4 billion in 2009Q4, vs. an output which increased from $218.8 billion to $272.9 billion over the same time period.
If I'm reading the chart correctly, the large gain in motor vehicle output brought output into line with sales, after two quarters of inventory liquidation. The gain in output related to motor vehicles would probably have been of a similar magnitude without cash for clunkers.
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=272&View...
On a secondary note, your readers might think that you refer to stimulus spending when you discuss the 8.3% rate of increase in federal government consumption/investment, but I wanted to note that roughly 3/4s of that increase was related to defense. Still government spending, but not stimulus spending.