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Q3 GDP revised upward significantly

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Q3 GDP revised upward significantly

Good news, but some worrying signs for future quarters.

Real gross domestic product increased at an annual rate of 4.1% in the third quarter, rather than the 3.6% previously reported, according to a Commerce Department report issued today.  In the second quarter, real GDP increased 2.5%.

Most economists expected growth to come in at around 2%

The Commerce Department indicated that the revised growth figure was the result of a more comprehensive set of data being available, and that the major adjustment was to the levels of private inventory investment.

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

"While the increased rate of growth is welcome, the nature of that increase presents some concern about future growth."

While the increased rate of growth is welcome, the nature of that increase presents some concern about future growth, as the largest contributor to the rate of growth was an increase in inventories. That increase, combined with decreases in the rate of growth in domestic purchases, suggests that growth in future quarters may be hampered by the clearing of stock.

The acceleration in real GDP growth in the third quarter also reflected a deceleration in imports and an acceleration in state and local government spending.

Prices remain stable

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.8% in the third quarter, compared with an increase of 0.2% in the second. Excluding food and energy prices, the price index for gross domestic purchases increased 1.5% in the third quarter, compared with an increase of 0.8% in the second.

The full report can be found here.

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