GDP Q3 Advance Estimate: 2.5 Percent

by: Doug Short

The Advance Estimate for Q3 GDP came in at 2.5 percent, a welcome improvement over the 1.3 percent final estimate for Q2.

Here is the opening text from the Bureau of Economics Analysis news release:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The "second" estimate for the third quarter, based on more complete data, will be released on November 22, 2011.

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment. [Full Release]

The consensus was for 2.3 percent and's own estimate were for 2.1 percent.

Here is a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I've also included recessions, which are determined by the National Bureau of Economic Research (NBER).

(Click charts to expand)

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Here is a close-up of GDP alone with a line to illustrate the 3.3 average (arithmetic mean) for the quarterly series since the 1947. I've also plotted the 10-year moving average, currently at 1.7. It's certainly good to see the Q3 GDP Advance Estimate above that moving average.

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Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe. The latest GDP number is slightly above the approximate 2.1 of the regression at the same position on the horizontal axis.

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And for a bit of political trivia in this post-election period, here is a look a GDP by party in control of the White House and Congress.
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In summary, the Q3 GDP Advance Estimate of 2.5 is still below the long-term 3.3 GDP average, but it is an encouraging continuation of the growth trend in 2011: From 0.4 in Q1 to 1.3 in Q2, and now an early read of 2.5 for Q3.