The third-quarter gross domestic product revision was a nonevent as components were altered slightly, with the same result that real growth dipped 0.5% overall. The only question this raised for the fourth quarter is how fast activity is dropping — and the answer lies in holiday sales, which so far remain slow amid massive discounting.

October-November data shows a declining pace of activity and analysts expect about a 6% drop in growth in the fourth quarter. The history books show the last time there was such poor results was the first quarter of 1982, which fell 6.4%. The Commerce Department provided no official word on how the fourth quarter is progressing.

New data in the third-quarter report revised residential structures higher, but nonresidential investment in the form of equipment and software were revised down, with no net effect on growth.

The main factors behind the third-quarter GDP drop remain a plunge in consumption and nonresidential fixed investment. These were offset to some extent by a 13.8% surge in federal spending, events that could continue in the fourth quarter.

Consumption fell 3.8%, with drops in all categories. Durables spending, generally the first thing consumers cut, fell 14.8%. Nondurables dropped 7.1%, their biggest fall since 1950. And services spending fell 0.1% in their biggest decline since the first quarter of 1991.

Inflation numbers remain subdued: core personal consumption expenditures were up 2.4%.

Also new is the corporate profits revision, now showing a $57.7 billion drop or down 10.7% pre-tax. Financial profits fell and nonfinancial gained on rises in oil and coal products and in wholesale trade.

— Market News International

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