12.21.07
Economic Trends
Third-Quarter 2007 Final GDP
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.
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.
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
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.
