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Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

12.21.07

Economic Trends

Third-Quarter 2007 Final GDP

Brent Meyer

Real Gross Domestic Product (GDP) advanced at a 4.9 percent annualized rate in the third quarter, according to the final estimate. The final revision was unchanged from the preliminary estimate and goes into the books as the strongest quarter since the third quarter of 2003. While the headline number remained unchanged from the preliminary estimate, some of the components were adjusted. Personal consumption expenditures were revised up slightly, as durable goods expenditures rose from 4.0 percent in the preliminary release to 4.5 percent in the final estimate. Concurrently, private inventories were revised down from an increase of $27.1 billion to one of $24.8 billion.

Real GDP and Components, 2007:IIIQ (final estimate)

        Annualized percent change, last:

 

Quarterly change, billions of 2000$ Quarter Four quarters
Real GDP
138.8
4.9
2.8
  Personal consumption
57.9
2.8
3.0
    Durables
13.5
4.5
4.7
    Nondurables
13.0
2.2
2.3
    Services
32.8
2.8
3.0
  Business fixed investment
30.7
9.4
5.1
    Equipment
16.1
6.2
1.5
    Structures
11.6
16.4
13.8
  Residential investment
−27.4
−20.5
−16.5
  Government spending
18.8
3.8
2.7
    National defense
12.2
10.1
5.7
  Net exports
40.8
    Exports
61.7
19.1
10.3
    Imports
20.9
4.3
1.7
    Change in business inventories
24.8

Source: Bureau of Economic Analysis.

Following two consecutive quarters below 2.0 percent, a strong third quarter elevated the four-quarter growth rate in real GDP to 2.8 percent. Since coming out of the last recession, the year-over-year growth rate has averaged 2.7 percent.

Real Gross Domestic Product

The final estimate of third quarter corporate profits was released with the GDP report. Profits before taxes were hampered by fallout from mortgage foreclosures and financial turmoil, and after having posted a $94.7 billion gain in the second quarter, fell $20.5 billion in the third. Profits are still up 1.8 percent over the third quarter of 2006, however.

Corporate Profits

With respect to the economic outlook, the Blue Chip panel of forecasters is expecting GDP growth to drop to 0.8 percent (annualized rate) in the fourth quarter, before returning to trend by the end of 2008

Real GDP Growth

The uncertainty surrounding the near-term growth outlook has caused forecasters to trim their predictions over the past couple of months. The Blue Chip consensus for fourth-quarter GDP growth fell 0.9 percentage point from November 10 to December 10 (the date of the forecast release). Out of 51 forecasting firms in the Blue Chip panel, 39 revised their 2008 GDP forecast down from November, 11 forecasts remained the same, and only 1 forecast was revised up.

GDP and Forecasts