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Brent Meyer |

Economist

Brent Meyer

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

01.06.09

Economic Trends

Real GDP: Third-Quarter Final Estimate

Brent Meyer

Real GDP decreased at an annualized rate of 0.5 percent in the third quarter of 2008 (unchanged from the preliminary estimate), according to the final estimate released by the Bureau of Economic Analysis. Personal consumption expenditures were revised down 0.1 percentage point to −3.8 percent, reflecting downward adjustments to both nondurables and services consumption, which were partially offset by an upward revision to durables consumption. Business fixed investment was largely unchanged during the revision. However, residential investment was revised up from −17.6 percent to −16.1 percent. Export growth in the third quarter was revised down again, increasing only 3.0 percent, compared to 3.4 percent in the preliminary release and 5.9 percent in the advance estimate. Imports were revised down to −3.5 percent from −3.2 percent in the preliminary release and −1.9 percent in the advance estimate.

Real GDP and Components, 2008:Q3 Final Estimate

Quarterly change,
billions of 2000$
Annualized percent change, last:
Quarter
Four quarters
Real GDP
−15.0
−0.5
0.7
Personal consumption
−80.7
−3.8
−0.2
  Durables
−48.2
−14.8
−5.5
  Nondurables
−44.4
−7.1
−0.9
Services
−0.8
−0.1
1.1
Business fixed investment
−6.1
−1.7
1.6
  Equipment
−20.7
−7.5
−3.1
  Structures
7.9
9.6
11.2
Residential investment
−15.9
−16.1
−20.6
Government spending
29.2
5.8
3.1
  National defense
22.3
18.0
7.7
Net exports
28.2
  Exports
11.4
3.0
6.1
  Imports
−16.9
−3.5
−3.5
Private inventories
−29.6

Source: Bureau of Economic Analysis.

Personal consumption expenditures, which last quarter added 0.9 percentage point to real GDP growth, subtracted 2.8 percentage points in the third quarter, marking the first time this component has subtracted from growth since the fourth quarter of 1991. Net exports added 1.1 percentage points to growth in the third quarter, following a 2.9 percentage point addition in the second quarter and a 1.4 percentage point addition over the past four quarters. The contribution from private inventories in the third quarter was revised up from 0.6 percentage point in the advance release to 0.8 percentage point in the final estimate (though this is down 0.1 percentage point from the preliminary estimate). Government spending added 1.1 percentage points to real GDP growth during the quarter, outpacing the this component’s average contribution over the past four quarters of 0.6 percentage point. Much of the increase was due to a jump in national defense spending, which added 0.9 percentage point to growth in the third quarter, compared to 0.4 percentage point last quarter.

Personal consumption decreased at an annualized rate of 3.8 percent in the third quarter of 2008, its steepest decline since 1980. The latest indicators of monthly personal consumption show a 5.5 percent decrease in October, followed by a 6.9 percent increase in November. However, it may not mean that consumers are headed to the mall just yet. Prices plummeted in November, outpacing the decline in nominal consumption, which led to the net increase. Nominal personal consumption (unadjusted for price effects) declined 11.5 percent in October and 6.5 percent in November.

The latest Blue Chip consensus forecast is for real GDP to drop 4.1 percent in the fourth quarter of 2008, marking the economy’s worst performance since the 1982 recession. The estimate fell 1.3 percentage points from the November forecast. Also, it seems that the 2009 outlook has darkened considerably, as nearly every panelist revised down his or her respective 2009 growth estimate from the last report. The 2009 consensus estimate fell from −0.4 percent in November to −1.1 percent in December.