WASHINGTON – The third quarter gross domestic product increased at a 2.8% annual rate, revised down from earlier reports of 3.5%rate of growth, as consumer spending and business investment figures retreated from October estimates, the Commerce Department reported today. Corporate profits increased by the most in five years.
Consumer spending, which accounts for about 70% of GDP, rose 2.9% at an annual pace in the third quarter, revised lower from a 3.4% rate of increase in the advance estimate. Core personal consumption expenditures, which exclude food and energy prices and is the Federal Reserve’s preferred measure of inflation, increased at a 1.3% annual rate in the preliminary reading, compared to the 1.4% climb in the advance reading.
Despite the downward revisions, third quarter GDP was still the largest since the third quarter of 2007. Real GDP decreased 0.7% in the second quarter and had fallen for four consecutive quarters.
Economists expected the GDP to be revised down to 2.9% growth and for the core PCE price index to be unchanged at 1.4% growth, according to the median estimate from Thomson Reuters.
Corporate profits, which are not included in the first quarterly GDP estimate, increased $130.0 billion, or 10.6% from the second quarter, the largest increase since the first quarter of 2004.
Gross private domestic investment increased at an 8.4% annual rate, revised lower from a 11.5% pace of growth. Residential fixed investment increased 19.5%, down from a 23.4% growth rate.
Exports and imports were revised higher reflecting new goods data for September. The trade gap between exports and imports widened to $358.0 billion at an annual pace from the $348.3 billion initially reported. Real exports increased 17.0% at an annual rate and imports increased 20.8%, the largest increase for imports since the second quarter of 1985. Both exports and imports fell in the second quarter.
Government spending was revised higher. Federal spending increased 8.3% at an annual rate from 7.9% initially reported. State and local spending declined 0.1% for the quarter, revised from a 1.1% decline.
Real disposable personal income decreased 1.5% at an annual rate in the third quarter from a 3.4% decrease initially reported. The American Recovery and Reinvestment Act contributed in part to the adjusted disposable income figures, the report said.
The Commerce Department will release its final third quarter GDP on Dec. 22.
