New GDP Figures

This morning the BEA released its very first stab at estimating economic growth during the summer of 2005 (July, August, and September). From the 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 3.8 percent in the third quarter of 2005, according to advance estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.3 percent.

…The acceleration in real GDP growth in the third quarter primarily reflected a smaller decrease in private inventory investment and accelerations in PCE and in federal government spending that were partly offset by decelerations in exports, in residential fixed investment, and in state and local government spending.

The first obvious point to make is simply to note that if there was a Katrina effect, it was not large enough to substantially dampen robust consumption growth during the quarter.

Household consumption spending showed no signs of slowing (rising at a 3.9% annualized rate), and business spending was solid, though not spectacular (rising at a 6.2% annualized rate for nonresidential spending). Interestingly, imports were stagnant for the second quarter in a row, when adjusted for inflation (though they went up substantially in nominal $ terms). Unfortunately, US real exports barely grew during the quarter as well. Note that this data also shows no sign of rising inflation outside of the energy sector.

The following picture shows year-on-year changes in the major components of GDP.

All in all, this report describes an economy that is still cruising along at a reasonable rate of growth, though clearly the current economic expansion is quite mature at this point and the economy is gradually slowing from the initial post-recession “boom”. This report does not contain anything dramatic to suggest that the current economic expansion began to wind down during the summer of 2005.