Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

The Third Quarter GDP Revisions - Better, But Not By Much

Thu, Nov 29, 2:22 PM ET, by Bob McTeer

The second estimate of third quarter real GDP growth rate was 2.7 percent, up from 2.0 percent in the initial estimate. On the surface, that is a substantial improvement, but a look at the components makes it less so. In fact, the entire increase was accounted for by an increase of 0.77 percent in inventories, which are often hard to interpret. Inventory increases are desirable if businesses are responding to stronger demand, but undesirable if they reflect unanticipated slumping sales. In the current environment it's hard to say which that is, but I'm inclined to believe they were at least partly involuntary.

The net change in the GDP estimate from the first to the second estimate of the third quarter reflects changes in several variables in addition to inventories. The foreign trade sector—imports and exports of goods and services—often changes significantly from quarter. Increases in exports add to GDP while increases in imports subtract from GDP because they were counted in other components of spending. While exports add and imports subtract, smaller increases in each have the opposite effect in estimating GDP from one quarter to the next.

In the latest estimate, the Bureau of Economic Analysis said "Real exports of goods and services increased 1.1 percent in the third quarter, compared with an increase of 5.3 percent in the second. Real imports of goods and services increased 0.1 percent, compared with an increase of 2.8 percent." In other words, exports provide a boost, but a smaller boost than the quarter before; imports provided less of a "leakage" than the previous quarter. So, while the trade deficit remained large (not a good thing), its slight shrinkage in the third quarter boosted real GDP by one percentage point, down from a net boost of 2.5 percentage points in the second quarter. Not only did the boost to GDP shrink from the second to third quarters, the slowing of the growth of both imports and exports is a reflection of a weak world economy.

One significant development in the third quarter numbers is that government spending increased for the first time in several quarters. Total government spending increased by a 3.5 percent annual rate in the third quarter, after declining in nine of the past ten quarters. The decline in state and local government spending was a small 0.4 percent in the third quarter, making it the twelfth consecutive quarter of decline. Federal government spending increased at a 9.5 percent rate in the third quarter after declining six out of seven previous quarters. The decline in government spending in recent quarters has received very little public attention.

Personal consumption spending increased 1.4 percent in the third quarter, about the same as the 1.5 percent increase in the second quarter. Real nonresidential fixed investment, however, declined 2.2 percent after increasing 3.6 percent in the second. Residential fixed investment increased 14.2 percent, compared with an increase of 8.5 percent. These large numbers are welcome, but do come off a low base.

The implicit GDP price deflator was up at a 1.4 percent rate in the third quarter, 0.1 percent less than in the advance estimate and above the 0.7 percent increase in the second quarter. Excluding food and energy, the index was up 1.1 percent in the third, compared to 1.4 percent in the second.

Bottom line: While the headline number looks better, the components take some of that luster away.

 


SDI Glossary: "price" Definition
SDI Glossary: "GDP" Definition
This Article's Word Cloud:   Real   While   after   boost   changes   compared   components   decline   declining   estimate   exports   first   fixed   from   goods   government   growth   hard   imports   increase   increased   increases   inventories   investment   large   less   numbers   often   other   percent   percentage   previous   quarter   quarters   rate   real   second   services   several   smaller   spending   subtract   than   that   they   third   were   which   while   with

| More

Four Myths about Entrepreneurship
Wed, Sep 17, 4:42 PM ET, by Donald Marron

Spoiler: 20-somethings make headlines, but founders in their 30s and 40s are more important. (Disclosure: ...

The Timing Is About Right for King Dollar
Mon, Sep 15, 5:11 PM ET, by Bob McTeer

Earlier in the recovery from the Great Recession, Larry Kudlow and most of his TV ...

"Ignore the Low Inflation and Strong Dollar. The Experiment Isn't Over Until Things Turn Bad."
Sat, Sep 13, 3:11 PM ET, by Bob McTeer

One of my favorite newspaper clippings is an op ed piece in the WSJ by ...

Does the Export-Import Bank Make or Lose Money?
Wed, Sep 10, 12:12 PM ET, by Donald Marron

Suppose your aunt decides to start a business making pizza ovens. She will design and ...

Money Hoarding
Sun, Sep 7, 3:11 PM ET, by Bob McTeer

A recent piece published by the St. Louis Fed concluded that inflation has been low ...

How Economic Insights Shaped the Web Economy
Sat, Aug 30, 8:12 AM ET, by Donald Marron

In this TEDx talk, Bob Litan shows how economic insights shaped the web economy, from ...

Why Has the Texas Economy Outperformed? A Surprising Answer From Paul Krugman
Wed, Aug 27, 4:11 PM ET, by Bob McTeer

Years ago, when I was still at the Dallas Fed and long before Governor Perry ...

Who Owns the Right to Recline? Property Rights in the Sky
Tue, Aug 26, 11:12 AM ET, by Donald Marron

“On Sunday, a United Airlines flight was forced to divert after two passengers got into ...

Todays Retail News Reel
Fri, Aug 22, 10:11 AM ET, by RetailSails.com

Here is what we are paying attention to in today's news:Time To Get Into Dollar ...

JOLTS Are Looking Good
Wed, Aug 13, 12:11 PM ET, by Bob McTeer

Jolts are not an external shock to the economy. Rather, Jolt is an an acronym ...

The Fed's Vice Chairman, Stanley Fischer, States the Obvious and Creates a Buzz
Mon, Aug 11, 9:21 PM ET, by Bob McTeer

In a speech in Sweden, apparently only the second one since becoming Vice Chairman of ...

Central Banker Heaven
Wed, Aug 6, 1:11 PM ET, by Bob McTeer

I have finally reached the point where people are quoting me from the old days, ...

Our International Trade Deficit - Down This Month, Up This Year
Wed, Aug 6, 11:51 AM ET, by Bob McTeer

A graph of the U.S. international trade deficit in goods and services over the past ...

The Employment Cost Index - Not Inflationary
Mon, Aug 4, 2:11 PM ET, by Bob McTeer

The Economic Cost Index for the second quarter got quite a bit of attention last ...

Happy Birthday Milton Friedman
Thu, Jul 31, 2:31 PM ET, by Bob McTeer

Today is the 102 anniversary of the birth of America's greatest economist, Milton Friedman. He ...

My New Paradigm Frog
Wed, Jul 30, 5:51 PM ET, by Bob McTeer

The highlight of my almost 14 year tenure as President of the Federal Reserve Bank ...

Whoopie GDP
Wed, Jul 30, 5:11 PM ET, by Bob McTeer

Well, real GDP finally hit a 4 percent growth rate in the second quarter; so, ...

The Federal Reserve is Not Ending Its Stimulus
Thu, Jul 10, 2:39 PM ET, by Donald Marron

Yesterday, the Federal Reserve confirmed that it would end new purchases of Treasury bonds and ...

The President's Minimum Wage Proposal
Thu, Jul 3, 6:28 PM ET, by Bob McTeer

This morning I heard President Obama bragging on the June jobs report. Moving on to ...

Go Economy Go!
Thu, Jul 3, 1:38 PM ET, by Bob McTeer

This morning's employment report showed an old-normal, wide-spread increase in payroll employment of 288,000, with ...

Happy Tau Day
Sat, Jun 28, 5:06 PM ET, by Donald Marron

Blogging’s been very light of late, but I couldn’t let June 28th slip by without ...

Exporting Energy
Tue, Jun 24, 12:28 PM ET, by Bob McTeer

I'm afraid the phrase "too soon old, too late smart" applies to me. To that ...

The Foreign Trade Imbalance
Mon, Jun 23, 2:33 PM ET, by Bob McTeer

People like me, who studied economics in the old days, learned that foreign trade imbalances ...

The ECB's Negative Interest Rate
Thu, Jun 5, 5:41 PM ET, by Bob McTeer

Among other easing measures, the ECB has cut the interest rate on its deposit facility ...

Monetarist vs. Keynesian: Velocity Is the Key
Mon, Jun 2, 2:51 PM ET, by Bob McTeer

One of the neat (in my opinion) things I used to do in elementary macro ...

The Ted Spread
Tue, May 20, 2:21 PM ET, by Bob McTeer

Yesterday, I attended an excellent conference on monetary policy at the Bush LibraryBush 43 that ...

The Fed Governor Shortage
Tue, May 13, 11:41 AM ET, by Bob McTeer

The New York Times has a pretty good article today about the unfilled seats on ...

Falling Dollar? It Depends on the Index
Mon, May 12, 2:11 PM ET, by Bob McTeer

When the Federal Reserve adopted a super easy monetary policy in response to the financial ...

How the Fed Fuels the Coming Inflation
Thu, May 8, 9:21 AM ET, by Bob McTeer

The title above is also the title of an opinion piece by Allan Meltzer in ...

Plunging Productivity: The Worst News of All
Wed, May 7, 1:11 PM ET, by Bob McTeer

In the glory days of the New Paradigm Economy in the late 1990's, sustained, above-average ...

Wage Inflation?
Wed, Apr 30, 4:51 PM ET, by Bob McTeer

"Economists, all or most of us consent If wage rates rise by 10 percent It ...

The FOMC's Low-Inflation Worries
Thu, Apr 10, 11:11 AM ET, by Bob McTeer

The minutes of the March FOMC meeting released yesterday, April 9, showed a heightened concern ...

Seven Tax Issues Facing Small Business
Wed, Apr 9, 3:52 PM ET, by Donald Marron

Today I had the chance to testify before the House Small Business Committee on the ...

Two Percent Inflation: A Good Thing Or A Bad Thing?
Tue, Apr 8, 5:11 PM ET, by Bob McTeer

Maybe it's just me, but it seems like every time Janet Yellen speaks publicly she ...

Lies, Damed Lies, and GDP
Sat, Apr 5, 1:21 PM ET, by Bob McTeer

Back in the day, I was being only partly facetious when I suggested that the ...

The Slow Recovery, Simplified & Rounded
Wed, Apr 2, 3:11 PM ET, by Bob McTeer

Not everybody waits like me every morning for the latest stat on how the economy ...

How Big is America’s Underground Sex Economy?
Wed, Mar 12, 1:12 PM ET, by Donald Marron

How big is the underground sex economy in the United States and how does it ...

Illusory Wealth
Sun, Mar 9, 3:11 PM ET, by Bob McTeer

The Federal Reserve recently reported that the net worth of American households grew by $9.8 ...

Today's Retail News Reel
Sun, Feb 23, 8:51 AM ET, by RetailSails.com

Here's what we're paying attention to in today's news:Walmart Pursuing Both 'Stock-Up' And 'Fill-In' Customers ...

The Fed Transcripts
Sat, Feb 22, 3:31 PM ET, by Bob McTeer

The hullabaloo over the 2008 FOMC transcripts, released yesterday after a five year lag, stirs ...

Spaghetti, Pies, and Clutterplots: Visualizing Data
Wed, Feb 5, 2:12 PM ET, by Donald Marron

Jonathan Schwabish has just published a wonderful guide to visualizing economic data. If you produce ...

Is Obamacare the New Gasoline Price Tax?
Wed, Feb 5, 11:31 AM ET, by Bob McTeer

A friend of mine recently told me that he knew his insurance premium would rise ...

A Good GDP Tradeoff: Net Exports Up; Government Spending Down
Mon, Feb 3, 10:51 AM ET, by Bob McTeer

When I look under the hood of GDP reports, the fly in the ointment I ...

Taper II and Goodbye Mr. Bernanke
Wed, Jan 29, 3:31 PM ET, by Bob McTeer

While I wasn't surprised that the FOMC accelerated their taper, I wouldn't have been surprised ...

Today's News Reel
Tue, Jan 28, 12:41 PM ET, by RetailSails.com

Here's what we're paying attention to in today's news:Merchant Warehouse and Retail Pro International Bust ...

RetailSails Website and Report Update
Tue, Jan 21, 4:11 PM ET, by RetailSails.com

As a result of all the improvements to our Digest, the report will now be ...

Keynes Was Right. Economists Should Aspire To Be Like Dentists
Mon, Jan 20, 10:12 AM ET, by Donald Marron

In a lengthy piece on “The Future of Jobs“, the Economist cites some estimates of ...

Why Do Economists Have a Bad Reputation?
Wed, Jan 15, 4:32 PM ET, by Donald Marron

Because macroeconomists have messed it up for every one else, says Noah Smith at The ...

Ben Bernanke, the Central Banker – A Tribute
Fri, Jan 3, 5:12 PM ET, by Donald Marron

A tribute to Ben Bernanke, sung to the tune of Rudolph the Red-Nosed Reindeer.University of ...

Musings As Time Runs Out on 2013
Tue, Dec 31, 6:11 PM ET, by Bob McTeer

If this must have an economics connection, all I can think of at the moment ...

Related videos | all videos »
  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

The Third Quarter GDP Revisions - Better, But Not By Much | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.