December 20, 2012

3Q12 GDP Growth: An Annualized 3.1%, Up From 2.7% in Previous Report

Filed under: Economy,Taxes & Government — Tom @ 9:16 am

From the Bureau of Economic Analysis:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.1 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.7 percent (see “Revisions” on page 3). The third estimate has not greatly changed the general picture of the economy for the third quarter except that personal consumption expenditures (PCE) is now showing a modest pickup, and imports is now showing a downturn.

Zero Hedge’s sum-up (bolds and paragraph breaks added by me):

reading between the lines reveals more of the same disappointing components, with nearly half of the entire 3.1% annualized growth being derived from Government (0.75) and Inventories (0.73%), combined adding 1.48% (more than in the second revision) of the 3.1% print.

Annualized Personal Consumption as a portion of the final number rose modestly from 0.99% to 1.12%, but still is well below the 1.42% in the first Q3 GDP estimate. It is this number that will be closely watched once the preliminary Q4 GDP number is released in a one month.

Recall that Q4 GDP is currently tracking between 0.5% and 1.5% depending who you ask.

Finally, the most important real growth factor for the US economy – fixed investment – remained stubbornly flat, at a mere 0.12%, virtually unchanged from the first revision’s 0.10%. In other words, in Q3 companies stubbornly refused to invest in capital investment i.e. CapEx, and will continue to do so as long as the Fed makes “investing” in dividends and buybacks a more rewarding option.

The inventory component is worse if you look at its elements: -0.38 Farm and +1.11 nonfarm. The negative number is a huge impact for such a relatively small economic sector, which is enough to make one wonder what might be happening to the food supply. The nonfarm number represents a potentially dangerous buildup, given that the fourth quarter is by all accounts not going nearly as well.

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