U.S. third quarter gross domestic product (GDP) was revised downward today after initial estimates of 3.5 percent two months ago and 2.8 percent last month gave way to a final 2.2 percent annual economic growth rate. Economists had expected only a minor -0.1 percentage point change from the recent 2.8 percent estimate. The lower GDP number created concern among economists regarding the strength of the economy in the absence of extraordinary federal deficit spending.
Consumer spending rose at a 2.8 percent annual rate for the quarter, and contributed 2 percentage points to GDP, owing about 1.5 percentage points to the federal government’s “Cash for Clunkers” program.
Some items were bumped higher in the latest report. Personal spending increased 2.8 percent in the third quarter despite falling 0.9 percent in the second quarter.
Corporate profits, previously estimated at a 10.6 percent growth rate, were raised to 10.8 percent–the largest increase in over five years.
Productivity gains, largely due to lower overall labor costs, helped drive corporate earnings higher. U.S. labor costs were down 2.5 percent in the third quarter.
Exports of goods and services were also positive for the third quarter, increasing 17.8 percent compared to a 4.1 percent drop in the second quarter. The declining U.S. dollar made exports more competitive.
Government expenditures slowed to 8 percent growth for the third quarter, down somewhat from 11.4 percent.
Despite positive growth, economists remain concerned the economy is still overly dependent on federal deficit spending rather than on business investment and consumer expenditures. The federal “Cash for Clunkers” program expired during the third quarter.
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"Cash" DefinitionSDI Glossary:
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