Tuesday, November 23, 2010

USA Q3 GDP Revised Upwards to +2.5% (Charts) "Sharp deceleration in imports"


USA Economy: positive contributions from personal consumption expenditures (PCE) & sharp deceleration in imports

USA Q3 GDP Second Estimate +2.5%

Official Statement (Bureau of Economic Analysis) At bottom of this post.

USA GDP Q3 Second Estimate The Bureau of Economic Analysis released the Second Estimate of 2010 Q3 GDP which was +2.5%, for a total GDP of $14.75 trillion. 2010 Q2 GDP was +1.7%, so the second estimate of Q3 is a good and surprising improvement, but below the Q1 GDP of +3.7% and well below the 2009 Q4 GDP of +5.0%.

Elusive GDP +3.0% A +3.0% annualized GDP growth rate is generally accepted as the minimum necessary to generate some jobs  growth. Therefore, the USA is growing at approximately 5/6 (83%) of the rate necessary to bring down the unemployment rate. The Big Question is where is the USA economy headed? Three scenarios are being much discussed: 1) a double dip recession whereby the GDP will turn negative, 2) the economy will continue this "bottom bouncing" with very slow growth, thereby continuing a high unemployment rate (i.e., less than +3.0% growth), or 3) the bottom is in and GDP growth will accelerate, and happy days will be here again. Scenario 2) with USA slow economic growth appears to be the consensus.

USA GDP by Quarter (Chart) The chart below is the annualized percentage change of the GDP (seasonally adjusted at annual rate) from the preceding quarter, the most common GDP measure. As can be seen, there was a negative dip into the Great Recession beginning 2008 Q1, a rebound peaking with the 2009 Q4, a downward trend in 2010 Q1 and Q2. The USA economy appeared to be at a crossroads in Q2: a continuing downwards trend towards zero growth or a bounce upwards from there? The Q3 +2.5% is a positive bounce upwards. The chart covers the last 23 quarters (5+ years) of USA GDP as reported by BEA from 2005 Q1 through 2010 Q3.

The moving 4-quarter average (1 year) is now +3.23%, which is just above a break-even economy on jobs, creating a small net increase in jobs - but is not robust. The 23-quarter average is +1.23% per quarter, which is a stalled economy, a flat economy, that is not producing jobs and has an increasing unemployment rate. However, the current Q3 GDP +2.5% is well above this average.

USA GDP by Quarter (Chart) The chart below is the GDP (seasonally adjusted at annual rate) in total current dollars. As can be seen, the USA economy peaked in 2008 Q3, bottomed in 2009 Q1 and Q2, now has increased 5 consecutive quarters, and exceeded the previous peak in 2010 Q2. The chart covers the last 23 quarters (5+ years) of USA GDP as reported by BEA from 2005 Q1 through 2010 Q3.

The Bureau of Economic Analysis Commentary on the 2010 Q3 GDP of +2.5% (Second Estimate)

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 2.5 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

The GDP estimates released today are based on more complete source data than were available for the advance estimate issued last month. In the advance estimate, the increase in real GDP was 2.0 percent (see "Revisions" on page 3).

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

The acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in imports and accelerations in private inventory investment and in PCE that were partly offset by a downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.

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