Magazine article Economic Trends

Real GDP: Third-Quarter 2009 Advance Estimate

Magazine article Economic Trends

Real GDP: Third-Quarter 2009 Advance Estimate

Article excerpt

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11.02.09

GDP rose at an annualized rate of 3.5 percent in the third quarter, somewhat higher than consensus expectations and pulling the four-quarter GDP growth rate up from -3.8 percent to -2.3 percent. The third quarter's increase was driven in large part by a 3.4 percent jump in personal consumption expenditures, the largest quarterly gain in this component since the first quarter of 2007. Durable goods purchases spiked up 22.3 percent, reflecting the impact of the CARS program. Residential investment recovered much of what it had lost in the second quarter, growing 23.3 percent and gaining 7.5 percentage points (pp) in its four-quarter growth rate. The growth in residential investment was the first growth in this component since the fourth quarter of 2005.

Other improvements could be seen in government spending and in the change in private inventories. Business fixed investment saw another quarterly decline, but this quarter's 2.5 percent drop is small in comparison to last quarter's 9.6 percent decline. Imports also outpaced exports, detracting from the growth in real GDP, even though exports grew for the first time in five quarters and imports grew for the first time in eight quarters.

Personal consumption contributed the most to the growth in real GDP, adding 2.4 pp. In its GDP release, the BEA cited the CARS program as a factor in this growth, as motor vehicle output alone added 1.7 pp to third-quarter output growth. The change in private inventories added 0.9 pp to growth in the third quarter, after three consecutive quarters of subtraction. Net exports ended up subtracting 0.5 pp from the real growth, as imports (a 2.0 pp subtraction in GDP accounting) outweighed exports (a 1.5 pp addition). Residential investment and government spending both added about one-half of a percentage point to real GDP growth.

The Blue Chip consensus forecast for 2009 real GDP improved from -2.6 to -2.5 percent during the October survey due to higher projections for the second half of 2009. The third-quarter first estimate came in 0.5 pp above the September consensus forecast and 0.3 pp above October's consensus. Fourth-quarter forecasts stayed at 2.4 percent, which remained high enough to improve the 2009 forecast. The consensus estimate for 2010 growth ticked up again, this month by 0.1 pp to 2.5 percent, its fifth upward revision in six months, though--at 2.5 percent--it still remains below its long-run trend. Looking ahead through the rest of the year, even pessimists are predicting positive GDP growth for the rest of this year and into 2010. …

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