Meet the Author

David E. Altig |

Vice President

David Altig was formerly vice president and associate director of research at the Federal Reserve Bank of Cleveland. Dr. Altig’s research is primarily focused on monetary and fiscal policy issues.

Meet the Author

Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

12.22.06

Economic Trends

Economic Activity: Revisions to Real GDP

David E. Altig and Brent Meyer

There will be another revision in July 2007—as there is every year— but until then the final word from the Bureau of Economic Analysis is that real Gross Domestic Product grew at an annualized rate of just under 2 percent in the third quarter. This is slightly below the preliminary estimate issued in November, but still above the growth rate estimate in October’s advance report.

Revisions to Real GDP: 2006:IIIQ

Sources: U.S. Department of Commerce, Bureau of Economic Analysis.

There is both unpleasant and (maybe) not-so-unpleasant news buried in the details of the latest revision. The single largest reason for the decline in the growth estimate from the preliminary report was a downgrading of private investment spending.

Contributions to Revisions in Contributions to Real GDP : 2006:IIIQ

Sources: U.S. Department of Commerce, Bureau of Economic Analysis.

The unpleasantness came by way of the fact that part of the decline in the investment estimate was a reflection of the ongoing weakness in residential investment. But the largest factor was a revision in the estimated pace at which businesses accumulated inventories over the quarter.

That’s the maybe not-so-unpleasant news. To the extent that an accumulation of inventories is either unwanted or intended to build desired ratios relative to sales, a slower pace of inventory build-up would be consistent with one less potential drag on production going forward, small though it may be.

Contributions to Revisions in Contributions to Real GDP : 2006:IIIQ

Sources: U.S. Department of Commerce, Bureau of Economic Analysis.