Meet the Author

Brent Meyer |

Economist

Brent Meyer

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

12.06.07

Economic Trends

Third-Quarter Preliminary GDP Release

Brent Meyer

Real GDP was revised up from 3.9 percent (annualized rate) to 4.9 percent, according to the preliminary estimate released by the Bureau of Economic Analysis. The one percentage point adjustment was primarily due to upward revisions to private inventories and exports, and a downward revision to imports. Private inventories added $27.1 billion in the third quarter, after a $17.2 billion upward revision. Exports were revised up 2.7 percentage points to 18.9 percent, while imports dropped a percentage point, resulting in a revised increase of 4.2 percent in the third quarter. Personal consumption expenditures were revised down from an increase of 3 percent to 2.7 percent, partially offsetting the upward revisions. If the preliminary estimate holds, it will be the largest annualized increase in GDP since the third quarter of 2003.

Compared to the past four quarters, the third quarter’s preliminary estimate is showing a slight deceleration in personal consumption expenditures and residential investment, while business fixed investment and exports are advancing well above growth over the past four quarters. The change in business inventories was the largest increase since the fourth quarter of 2005.

Real GDP and Components, Third-Quarter Advance Estimate

Quarterly change
(billions of 2000$)
Annualized percent change, last:
Quarter
Four quarters
Real GDP
139.2
4.9
2.8
Personal consumption
54.2
2.7
2.9
  Durables
12.0
4.0
4.6
  Nondurables
11.1
1.9
2.2
Services
32.1
2.8
3.0
Business fixed investment
30.9
9.4
5.2
  Equipment
18.5
7.2
1.7
  Structures
10.2
114.3
13.3
Residential investment
-26.2
-19.7
-16.3
Government spending
19.1
3.8
2.7
  National defense
12.2
10.1
5.7
Net exports
40.5
  Exports
60.9
18.9
10.2
  Imports
20.4
4.2
1.7
Change in business inventories
27.1

Net exports have been a hot topic as of late, partly due to weakness in the dollar, and were a major contributor to growth in the third quarter. Real exports increased 18.9 percent, their largest increase since the fourth quarter of 2003, while imports, which take away from growth in GDP accounting, increased only 4.2 percent. While the dollar value of exports is nowhere near the value of imports (which is reflected in our –$533.4 net export balance), the recent trend of higher export growth is starting to close the gap. In fact, the $40.5 billion change in net exports in the third quarter is the largest gain the series has ever seen since its start in 1947. The only quarter that comes close is the fourth quarter of 1996, which saw a $39.4 billion addition. That being said, net exports haven’t been positive since the second quarter of 1982.

The near-term consensus growth forecast, as produced by the Blue Chip panel of economists, has GDP dipping down to a growth rate of 1.7 percent but then rebounding to 2.8 percent by the end of 2008. Compared to their October forecast,  this is a slightly weaker outlook over the next year.