Economy Watch: Real GDP Surges in 3Q

Consumer spending drove real US GDP up by 3.2 percent, marking the strongest growth in two years.
Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Consumers and especially businesses and governments joined forces during the third quarter to drive real U.S. GDP upward by an annualized 3.2 percent, according to a revised estimate released on Tuesday by the Bureau of Economic Analysis. The previous estimate was 2.9 percent, but in either case, that represents an improvement from the final second-quarter numbers, which put GDP up by an annualized 1.4 percent.

Not only that, real gross domestic income increased an annualized 5.2 percent in the third quarter, compared with an increase of only 0.7 percent in the second.

According to the BEA, the acceleration in real GDP in the third quarter primarily reflected an upturn in private inventory investment, or business spending. There was also an acceleration in exports, an upturn in federal government spending, and smaller decreases in state and local government spending and residential fixed investment.

These factors were partly offset by a drop in personal consumption expenditures (PCE, or people out spending), an acceleration in imports, and a deceleration in nonresidential fixed investment (which is partly commercial real estate).

Price increases are still moderate as well, the BEA said. Its price index for gross domestic purchases increased 1.5 percent in the third quarter, compared with an increase of 2.1 percent in the second quarter. The PCE price index increased 1.4 percent during the third quarter, compared with an increase of 2 percent during the previous quarter. Excluding food and energy prices, the PCE price index increased 1.7 percent during the third quarter, compared with an increase of 1.8 percent in the previous quarter.