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John Lindner |

Research Analyst

John Lindner

John Lindner is a former research analyst in the Research Department of the Federal Reserve Bank of Cleveland.

11.02.09

Real GDP: Third-Quarter 2009 Advance Estimate

John Lindner

GDP rose at an annualized rate of 3.5 percent in the third quarter, somewhat higher than consensus expectations and pulling the four-quarter GDP growth rate up from −3.8 percent to −2.3 percent. The third quarter's increase was driven in large part by a 3.4 percent jump in personal consumption expenditures, the largest quarterly gain in this component since the first quarter of 2007. Durable goods purchases spiked up 22.3 percent, reflecting the impact of the CARS program. Residential investment recovered much of what it had lost in the second quarter, growing 23.3 percent and gaining 7.5 percentage points (pp) in its four-quarter growth rate. The growth in residential investment was the first growth in this component since the fourth quarter of 2005.

Other improvements could be seen in government spending and in the change in private inventories. Business fixed investment saw another quarterly decline, but this quarter’s 2.5 percent drop is small in comparison to last quarter’s 9.6 percent decline. Imports also outpaced exports, detracting from the growth in real GDP, even though exports grew for the first time in five quarters and imports grew for the first time in eight quarters.

Real GDP and Components, 2009:Q3 Advance Estimate

Quarterly change,
billions of 2005 $
Annualized percent change, last:
Quarter
Four quarters
Real GDP
112.5
3.5
−2.3
Personal consumption
76.1
3.4
0.0
  Durables
55.5
22.4
−1.1
  Nondurables
10.2
2.0
−0.8
  Services
17.8
1.2
0.4
Business fixed investment
−8.2
−2.5
−18.9
  Equipment
2.5
1.1
−17.9
  Structures
−9.3
−9.0
−20.8
Residential investment
18.5
23.3
−18.1
Government spending
14.8
2.3
1.8
  National defense
14.1
8.4
5.0
Net exports
−17.9
  Exports
49.6
14.7
−11.2
  Imports
67.5
16.3
−14.9
Private inventories
−130.8

Source: Bureau of Economic Analysis.

Personal consumption contributed the most to the growth in real GDP, adding 2.4 pp. In its GDP release, the BEA cited the CARS program as a factor in this growth, as motor vehicle output alone added 1.7 pp to third-quarter output growth. The change in private inventories added 0.9 pp to growth in the third quarter, after three consecutive quarters of subtraction. Net exports ended up subtracting 0.5 pp from the real growth, as imports (a 2.0 pp subtraction in GDP accounting) outweighed exports (a 1.5 pp addition). Residential investment and government spending both added about one-half of a percentage point to real GDP growth.

The Blue Chip consensus forecast for 2009 real GDP improved from −2.6 to −2.5 percent during the October survey due to higher projections for the second half of 2009. The third-quarter first estimate came in 0.5 pp above the September consensus forecast and 0.3 pp above October’s consensus. Fourth-quarter forecasts stayed at 2.4 percent, which remained high enough to improve the 2009 forecast. The consensus estimate for 2010 growth ticked up again, this month by 0.1 pp to 2.5 percent, its fifth upward revision in six months, though—at 2.5 percent—it still remains below its long-run trend. Looking ahead through the rest of the year, even pessimists are predicting positive GDP growth for the rest of this year and into 2010.

One of the most noticeable pieces of this third-quarter advanced estimate is the return to growth of both imports and exports. Exports grew to over $128 billion, reaching their highest mark of this year, likely influenced by a modest dollar depreciation during the third quarter. Imports recovered to January levels, rising 16.3 percent in the third quarter to a level near $160 billion. As a direct result of this growth, July’s percent change in the trade deficit was a 16 percent increase, the largest month-to-month growth in over 10 years. The deficit grew to $32 billion during that span, an amount unseen since the very beginning of this year. The growth in exports is consistent with a recovery in foreign economies, while the rise in imports could be an early signal that U.S. consumers are confident enough to begin spending again. Even with import growth outpacing exports last quarter, the deficit remains below the $46 billion it has averaged from 2000 to 2007.