Advance Q3 GDP Shows 2.9% Growth

WASHINGTON - The U.S. third-quarter real gross domestic product grew at the fastest rate in two years, rising 2.9% and beating expectations for a 2.7% gain, data released Friday by the Bureau of Economic Analysis showed.

The stronger pace of third quarter growth was due to an even sharper rebound in inventories investment than analysts expected, as well as a slightly narrower trade gap.

The real-dollar change in inventories rose by $12.6 billion in the third quarter, compared to a $9.5 billion drop in the second, and contributed 0.6 percentage point to overall growth.

Exports jumped by 10.0%, contributing 1.2 percentage points to headline growth. That sharp acceleration from the second quarter's 1.8% gain mainly reflected an increase in exports of soybeans, the BEA said. 

The boost in soybean exports was offset by decreases in some categories of inventory investment, most notably in merchant wholesale inventories of farm product raw material, the BEA said.

Personal consumption expenditures was the biggest contributor in the quarter, accounting for 1.5 percentage points of GDP growth, though the pace of growth slowed from the second quarter. PCE rose 2.1% in the third quarter compared with 4.3% in the second and 1.6% in the first.

The chain price index rose 2.1% in the quarter, while the core PCE price index was up 1.7% in the quarter and 1.7% year on year, the fastest pace in two years. The core PCE price index is a closely watched indicator by the Federal Reserve, and it had risen by 1.6% in both the first and second quarters.

Fixed investment fell 0.6% in the quarter, a smaller decrease than in the first half of the year, with weakness in residential investment and equipment offset by increases in nonresidential structures and intellectual property investment.

Government spending edged higher by 0.5% but contributed marginally to growth. Federal government spending rose 2.5% but state and local spending dipped by 0.7%.

Real final sales were up 2.3% in the quarter, compared with 2.6% in the previous quarter.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.
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