Keeping you up to date on the latest data releases.
Real GDP was revised up sharply (from 2.0 percent to 2.7 percent) in the third quarter, according to the second estimate from the Bureau of Economic Analysis. Although, the reason for the upward revision doesn't necessarily portend a more positive growth trend. The bulk of the upward revision was due to a sizeable bump up in inventories investment, which is now estimated to have added 0.8 percentage points to third-quarter growth compared to a 0.1 percentage point takeaway in the advance release. Stronger inventory growth is an ambiguous signal for future growth as it could mean that businesses are either gearing up for stronger demand in the future or failed to properly estimate current demand. The other source of new-found third-quarter growth was an upward revision to real export growth, which were revised up from a 1.6 percent decline to a 1.1 percent increase during the quarter and representing a roughly 0.4 percentage point swing in output growth.
On the other hand, the second estimate for 2012:Q3 GDP growth contained some slightly negative news for consumption growth and business fixed investment. Real personal consumption expenditures growth slipped from 2.0 percent to 1.4 percent during the revision, knocking down its contribution to output growth from 1.4 percentage points to 1.0 percentage point. Much of the revision was due to a revision to services consumption which was revised down from an increase of 0.8 percent during the quarter to a mere 0.3 percent gain. Digging into the details reveals that a large chunk of the downward revision to services consumption stems from a knockdown to financial services and insurance consumption—which subtracted an additional 0.2 percentage points from overall growth on its own. Equipment and software investment was revised down from a flat reading to a 2.2 percent decline in the third quarter (and, given the recent durables report, may decline further in in the fourth). This was partially offset by an upward revision to real structures investment, which was revised up from a 4.4 percent decline to a 1.0 percent decline. As a category, business fixed investment subtracted 0.2 percentage points from real GDP in 2012:Q3, a downward revision of roughly a tenth.
Alongside the expenditures data, we also received our first glance at real Gross Domestic Income (GDI) in the report. Real GDI rose 1.7 percent in the third quarter, compared to a 0.7 percent decline in the second quarter. On a year-over-year basis, real GDI is up 2.3 percent, roughly in line with the 4-quarter growth rate of 2.5 percent for real GDP.