WASHINGTON – Real gross domestic product increased at a 2.0% annual rate in the third quarter, which ended Sept. 30, aided by consumer spending, the Commerce Department reported Friday.
Core personal consumption expenditures, which excludes food and energy purchases, the Federal Reserve’s preferred measure of inflation, increased 0.8% on an annual basis, below economists’ estimates for the quarter and may support the Fed’s anticipated asset purchase plan.
Consumer spending, which accounts for about 70% of real GDP, increased 2.6% on an annual rate, up from a 2.2% gain in the second quarter. It was the largest increase in consumer spending since the fourth quarter of 2006 and added 1.79 percentage points to GDP.
Most of the consumption came from spending on services, which increased 2.5% on an annual rate for the quarter, also the largest gain since the second quarter of 2006. Household consumption expenditures added 1.07 percentage points to GDP growth.
The 0.8% rise in core personal consumption expenditures was the smallest gain since the fourth quarter of 2008. The Fed is widely expected to announce next week a renewed asset purchase program to ward off deflation concerns.
Economists expected GDP to rise 2.0% for the quarter, according to the median estimate from Thomson Reuters. Economists expected core consumer expenditures would increase 1.0% for the quarter. Real GDP expanded at a 1.7% rate in the second quarter and a 3.7% pace in the first quarter of 2010.
Import and export growth slowed for the quarter. The trade deficit between imports and exports shrank by $198.5 billion to $363.0 billion. Imports increased by 11.2% and exports increased by 5.0%, both down from the second quarter. The increase in exports was the smallest since the second quarter of 2009 when exports declined.
Imports sapped 2.61 percentage points in the third quarter, down from pulling a record 4.58 percentage points from GDP in the second quarter.
Private inventories grew, adding 1.44 percentage points to GDP, up from a 0.82 percentage point contribution in the second quarter.
Real nonresidential fixed investment increased 5.0% in the third quarter, compared with a 9.1% increase in the second quarter. Real residential fixed investment plummeted 29.1%, the largest decline since the first quarter of 2009.
Government spending increased at a 3.4% rate in the quarter, down from the 3.9% pace in the second quarter. State and local spending shrank 0.2% for the quarter following a 0.6% increase in the second quarter.
The American Recovery and Reinvestment Act of 2009 lowered personal taxes by about $120 billion at an annual rate and raised government social benefits by about $60 billion in the quarter. State and local governments received about $101 billion in grants such as Medicaid and education support. Capital transfers to state and local governments, homebuyers and businesses was about $42 billion.
