Another revision, but instead of the usual downward revision, the Commerce Dept. revised their numbers up…thanks to government spending.
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 2.7 percent in the third quarter of 2012 (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 1.3 percent.
The GDP estimate released today is 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, federal government spending, residential fixed investment, and exports that were partly offset by negative contributions from
nonresidential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased slightly.
So..what was the factor that pushed the GDP to 2.7%? GOVERNMENT SPENDING…not consumer spending…
…Real federal government consumption expenditures and gross investment increased 9.5 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increased 12.9 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent. Real state and local government consumption expenditures and gross investment decreased 0.4 percent, compared with a decrease of 1.0 percent.
The economy is still weak and even Reuters pointed this out:
Gross domestic product expanded at a 2.7 percent annual rate, the Commerce Department said on Thursday, as export growth also helped to offset the weakest consumer spending and first drop in business investment in more than a year.
While the growth pace was much quicker than the 2 percent rate the government estimated last month and the best since the fourth quarter of 2011, it was hardly a sign of strength as the lift from inventories will likely be lost in the fourth quarter.
The economy is also bracing for deep cuts in government spending and tax increases early next year, known as the fiscal cliff, which could suck $600 billion from the economy and fuel a fresh recession.