GDP BEATS EXPECTATIONS, RISES 2.0%

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Q3 GDP is out.The number came in better than expected, rising 2.0 per cent versus estimates of a 1.8 per cent gain.

Personal consumption rose 2.0 per cent, missing expectations of a 2.1 per cent rise.

Core PCE increased 1.3 per cent, right in line with expectations.

The main driver of the surprise to the upside was a big increase in federal defence spending. Click here for more on that >

Here are the key paragraphs:

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), federal government spending, and residential fixed investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP in the third quarter primarily reflected an upturn in federal government spending, a downturn in imports, an acceleration in PCE, a smaller decrease in private inventory investment, an acceleration in residential fixed investment, and a smaller decrease in state and local government spending that were partly offset by downturns in exports and in nonresidential fixed investment.

Here is the full release:

Real gross domestic product — the output of goods and services produced by labour and property located in the United States — increased at an annual rate of 2.0 per cent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 per cent.

The Bureau emphasised that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see box below). The “second” estimate for the third quarter, based on more complete data, will be released on November 29, 2012.

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), federal government spending, and residential fixed investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP in the third quarter primarily reflected an upturn in federal government spending, a downturn in imports, an acceleration in PCE, a smaller decrease in private inventory investment, an acceleration in residential fixed investment, and a smaller decrease in state and local government spending that were partly offset by downturns in exports and in nonresidential fixed investment.

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FOOTNOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to-quarter dollar changes are differences between these published estimates. per cent changes are calculated from unrounded data and are annualized. “Real” estimates are in chained (2005) dollars. Price indexes are chain-type measures.

This news release is available on BEA’s Web site along with the Technical Note and Highlights related to this release.
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Final sales of computers added 0.17 percentage point to the third-quarter change in real GDP after subtracting 0.10 percentage point from the second-quarter change. Motor vehicle output subtracted 0.47 percentage point from the third-quarter change in real GDP after adding 0.20 percentage point to the second-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.5 per cent in the third quarter, compared with an increase of 0.7 per cent in the second. Excluding food and energy prices, the price index for gross domestic purchases increased 1.3 per cent in the third quarter, compared with an increase of 1.4 per cent in the second.

Real personal consumption expenditures increased 2.0 per cent in the third quarter, compared with an increase of 1.5 per cent in the second. Durable goods increased 8.5 per cent, in contrast to a decrease of 0.2 per cent. Nondurable goods increased 2.4 per cent, compared with an increase of 0.6 per cent. Services increased 0.8 per cent, compared with an increase of 2.1 per cent.

Real nonresidential fixed investment decreased 1.3 per cent in the third quarter, in contrast to an increase of 3.6 per cent in the second. Nonresidential structures decreased 4.4 per cent, in contrast to an increase of 0.6 per cent. Equipment and software decreased less than 0.1 per cent, in contrast to an increase of 4.8 per cent. Real residential fixed investment increased 14.4 per cent, compared with an increase of 8.5 per cent.

Real exports of goods and services decreased 1.6 per cent in the third quarter, in contrast to an increase of 5.3 per cent in the second. Real imports of goods and services decreased 0.2 per cent, in contrast to an increase of 2.8 per cent.

Real federal government consumption expenditures and gross investment increased 9.6 per cent in the third quarter, in contrast to a decrease of 0.2 per cent in the second. National defence increased 13.0 per cent, in contrast to a decrease of 0.2 per cent. Nondefense increased 3.0 per cent, in contrast to a decrease of 0.4 per cent. Real state and local government consumption expenditures and gross investment decreased 0.1 per cent, compared with a decrease of 1.0 per cent.

The change in real private inventories subtracted 0.12 percentage point from the third-quarter change in real GDP after subtracting 0.46 percentage point from the second-quarter change. Farm inventories subtracted 0.42 percentage point from the third-quarter change after subtracting 0.17 percentage point from the second-quarter change. Nonfarm inventories added 0.30 percentage point to the third-quarter change after subtracting 0.29 percentage point from the second-quarter change.

Real final sales of domestic product — GDP less change in private inventories — increased 2.1 per cent in the third quarter, compared with an increase of 1.7 per cent in the second.

Gross domestic purchases

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 2.1 per cent in the third quarter, compared with an increase of 1.0 per cent in the second.

Disposition of personal income

Current-dollar personal income increased $89.3 billion (2.7 per cent) in the third quarter, compared with an increase of $130.3 billion (4.0 per cent) in the second.

Personal current taxes increased $13.2 billion in the third quarter, compared with an increase of $20.2 billion in the second.

Disposable personal income increased $76.1 billion (2.6 per cent) in the third quarter, compared with an increase of $110.0 billion (3.8 per cent) in the second. Real disposable personal income increased 0.8 per cent, compared with an increase of 3.1 per cent.

Personal outlays increased $111.4 billion (4.0 per cent) in the third quarter, compared with an increase of $57.4 billion (2.0 per cent) in the second. Personal saving — disposable personal income less personal outlays — was $445.0 billion in the third quarter, compared with $480.3 billion in the second.

The personal saving rate — personal saving as a percentage of disposable personal income — was 3.7 per cent in the third quarter, compared with 4.0 per cent in the second. For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to www.bea.gov/national/nipaweb/Nipa-Frb.asp.

Current-dollar GDP

Current-dollar GDP — the market value of the nation’s output of goods and services — increased 5.0 per cent, or $190.1 billion, in the third quarter to a level of $15,775.7 billion. In the second quarter, current-dollar GDP increased 2.8 per cent, or $107.3 billion.

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BOX. Information on the assumptions used for unavailable source data is provided in a technical note that is posted with the news release on BEA’s Web site. Within a few days after the release, a detailed “Key Source Data and Assumptions” file is posted on the Web site. In the middle of each month, an analysis of the current quarterly estimate of GDP and related series is made available on the Web site; click on Survey of Current Business, “GDP and the Economy.” For information on revisions, see “Revisions to GDP, GDI, and Their Major Components.”
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BEA’s national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA’s Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

* * *

Next release — November 29, 2012, at 8:30 A.M. EST for:
Gross Domestic Product: Third Quarter 2012 (Second Estimate)
Corporate Profits: Third Quarter (Preliminary Estimate)

* * *

Release Dates in 2013

2012: IV and 2012 annual 2013: I 2013: II 2013: III

Gross Domestic Product
Advance… January 30 April 26 July 31 October 30
Second… February 28 May 30 August 29 November 26
Third… March 28 June 26 September 26 December 20

Corporate Profits
Preliminary… …….. May 30 August 29 November 26
Revised… March 28 June 26 September 26 December 20 

Comparisons of Revisions to GDP

Quarterly estimates of GDP are released on the following schedule: the “advance” estimate, based on source data that are incomplete or subject to further revision by the source agency, is released near the end of the first month after the end of the quarter; as more detailed and more comprehensive data become available, the “second” and “third” estimates are released near the end of the second and third months, respectively.

The “latest”” estimate reflects the results of both annual and comprehensive revisions. Annual revisions, which generally cover the quarters of the 3 most recent calendar years, are usually carried out each summer and incorporate newly available major annual source data. Comprehensive (or benchmark) revisions are carried out at about 5-year intervals and incorporate major periodic source data, as well as improvements in concepts and methods that update the accounts to portray more accurately the evolving U.S. economy.

The table below shows comparisons of the revisions between quarterly per cent changes of current dollar and of real GDP for the different vintages of the estimates. From the advance estimate to the second estimate (one month later), the average revision to real GDP without regard to sign is 0.5 percentage point, while from the advance estimate to the third estimate (two months later), it is 0.6 percentage point. From the advance estimate to the latest estimate, the average revision without regard to sign is 1.3 percentage points. The average revision (with regard to sign) from the advance estimate to the latest estimate is 0.2 percentage point, which is larger than the average revisions from the advance estimate to the second or to the third estimates. The larger average revisions to the latest estimate reflect the fact that comprehensive revisions include major improvements, such as the incorporation of BEA’s latest benchmark input-output accounts. The quarterly estimates correctly indicate the direction of change of real GDP 97 per cent of the time, correctly indicate whether GDP is accelerating or decelerating 72 per cent of the time, and correctly indicate whether real GDP growth is above, near, or below trend growth more than four-fifths of the time.

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ORIGINAL: Minutes away from a huge datapoint and a key read on the economy just ahead of the presidential election: the first reading of Q3 GDP at 8:30 AM ET.

Economists polled by Bloomberg expect 1.8 per cent GDP growth quarter-over-quarter.

Personal consumption is expected to expand at a 2.1 per cent rate.

The Core PCE (Personal Consumption Expenditures) price index is expected to rise 1.3 per cent.

Earlier, we highlighted Nomura economist Ellen Zentner’s preview of the report:

GDP, Q3 advance: Stronger consumer spending (which includes the effects of the iPhone 5 release), higher inventory levels, and a quicker pace of home building will contribute most to GDP growth in Q3. Along with consensus, we estimate an annualized increase in real GDP of 1.8% in Q3 compared with 1.3% in Q2. We expect the effects of the slowdown in global growth to be visible through weaker net trade and a small decline in investment in equipment and software.

Last month, the final reading for Q2 GDP came in at 1.3 per cent versus expectations of 1.7 per cent.

We will have the release LIVE at 8:30 AM ET. Click here for updates >

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