Economy

Q3 GDP Revised Lower, but Not Enough to Matter

Jon C. Ogg

Published: December 22, 2015 9:25 am

Last Updated: January 13, 2020 3:49 pm

Third-quarter gross domestic product (GDP) may have been in line with estimates at 2.0%, but this is actually a revision from a prior 2.1% reading. This was the Bureau of Economic Analysis’s final look at third-quarter GDP. The slowdown has been seen globally, and it is important to keep in mind that this third quarter was when China’s slowdown was happening at a lightning-fast pace. In the second quarter, real GDP increased by some 3.9%.

Several factors played into the lower revision and into the slowing trend. The strong dollar is making exports choppy, and the slowing in the major growth markets is acting as the other drag. Capital spending is choppy, and lower oil and gas is not translating to massive gains in consumer spending.

Private inventory investment decreased more than previously estimated. Real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, state and local government spending, residential fixed investment and exports that were partly offset by a negative contribution from private inventory investment.

Imports, which are a subtraction in the calculation of GDP, increased. If the dollar is so much stronger, that makes imports cheap.

The deceleration seen in real GDP primarily reflected a downturn in private inventory investment and decelerations in exports, in PCE, in nonresidential fixed investment and in state and local government spending that were partly offset by a deceleration in imports.

Real gross domestic income (GDI), the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, rose by 2.7% in the third quarter. That compared to a gain of 2.2% in the second quarter.

So, what does all of this translate to in real dollars and cents?

The current-dollar GDP, the market value of the goods and services produced by the nation’s economy minus the value of the goods and services used up in production, rose by 3.3% or $146.5 billion to a level of $18.0602 trillion. In the second quarter, current-dollar GDP rose by 6.1% or $264.4 billion.

While this is a very slight revision lower, the second (and nearly final) revision of GDP just does not move the markets. We have already started getting December and November economic reports, and this measured the period of time from July 1 to September 30.