GDP Rises to 3.2%, But Misses Expectations

The 3rd GDP estimate for Q3 came in at 3.2 percent — an increase over the previous quarter’s 2.6 percent but well below the Briefing.com consensus of 3.7 and Briefing.com’s own estimate of 3.8. Here is an excerpt from the full BEA announcement:

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 3.2 percent in the fourth quarter of 2010, (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.6 percent.

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

The acceleration in real GDP in the fourth quarter primarily reflected a sharp downturn in imports, an acceleration in PCE, and an upturn in residential fixed investment that were partly offset by downturns in private inventory investment and in federal government spending and a deceleration in nonresidential fixed investment.

Final sales of computers added 0.31 percentage point to the fourth-quarter change in real GDP after adding 0.29 percentage point to the third-quarter change. Motor vehicle output subtracted 0.34 percentage point from the fourth-quarter change in real GDP after adding 0.49 percentage point to the third-quarter change.

Here’s a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I’ve also included recessions, which are determined by the National Bureau of Economic Research (NBER).
GDP Overview

Here a close-up of GDP alone with a line to illustrate the 3.3 average (arithmetic mean) for the quarterly series since the 1947.
GDP Since 1947

Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe. The latest GDP number is 0.4 above the approximate 2.2 of the regression at the same position on the horizontal axis.

GDP Since 1947 with Regression

In summary, the Advance Q4 2010 GDP of 3.2 was just shy of the long-term 3.3 average but well below the general consensus view that had hoped for evidence of a stronger economic recovery following the Financial Crisis and Great Recession.

Doug Short Ph.d is the author of dshort.com.

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