WASHINGTON – Real gross domestic product increased 2.6% at an annual rate in the third quarter, revised higher on a stronger inventory investment estimate, the Commerce Department reported Wednesday. Core personal consumption expenditures were revised to a record low.
Consumer spending, which accounts for about 70% of GDP, was revised lower to a 2.4% increase on updated data from health care and financial services spending.
Core personal consumption expenditures, which is the Federal Reserve’s preferred measure of inflation, was revised lower to a 0.5% increase for the quarter from 0.8% reported last month and a 1.0% rise in the second quarter. It was the lowest reading for core PCE since quarterly records began in 1959. During the fourth quarter of 2008, the worst quarter of the recession when GDP contracted by 6.8%, core PCE increased 0.6%.
Economists expected GDP to be revised to 2.8% annual growth, according to the median estimate from Thomson Reuters. Economists expected core PCE to increase 0.8%.
GDP increased 1.7% in the second quarter and 3.7% in the first quarter of this year. Today’s report was the third and final release for the third quarter that ended on Sept. 30. Advance estimates for fourth quarter GDP will be released on Jan. 28.
Gross private domestic investment was revised higher to a 15.0% increase from 12.4% reported last month. Private inventory investment added 1.61 percentage points to GDP, up from a 1.30 percentage point contribution in last month’s estimate. Private investment had expanded by more than 20% in each of the last three quarters.
Exports were revised higher to a 6.8% increase. Imports were unchanged at a 16.8% increase. The trade deficit for the quarter was revised lower to $550.5 billion from $552.2 billion reported in the previous estimate.
State and local spending was revised slightly lower to a 0.7% increase from a 0.8% gain reported last month. State and local spending has increased in back-to-back quarters for the first time since the second and third quarters of 2008. Federal spending increased 8.8% for the quarter.
Corporate profits increased $26.0 billion, or 1.6% in the quarter, revised lower from a $44.4 billion increase reported last month.
