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Real, that is, inflation-adjusted, gross domestic product grew at an annualized rate of 2.8 percent in the third quarter of 2013, the Commerce Department's Bureau of Economic Analysis announced Thursday. That is the same reading as for the third quarter in 2012 and well above the 2 percent consensus that expert analysts had predicted:
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.

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

Despite the better-than-expected expansion—compared with the second-quarter's 2.5 percent growth and the first quarter's 1.1 percent—key components of the GDP report suggest that the economy is still not on a path to break out of the slow-growth pattern it has been locked in since the Great Recession officially ended 53 months ago.

• Business inventories were up, a reflection of restocking for the holiday spending spree that provides retailers with a hefty chunk of their overall earnings each year. But if purchases aren't strong enough, that could mean less production in the fourth quarter.

• Consumer spending only grew at 1.5 percent, the slowest level since the first quarter of 2010, which could indicate that the annual holiday splurge may be cautious.

• Investment across the economy grew at a healthy 9.5 percent, in large part in the housing sector. But investment in non-residential equipment fell by 3.7 percent, only the second time that has happened since June 2009.

• The inflation-measuring price index for personal consumer expenditures grew 1.9 percent. The core inflation rate, which excludes food and energy prices grew 1.4 percent.

The median estimate of 71 economists surveyed by Bloomberg forecasts fourth-quarter GDP growth at 2 percent, down from the 2.4 percent forecast just a month ago. If that holds true and the third-quarter estimate isn't revised, GDP growth for all of 2013 will clock in at 2 percent, well below the predictions that ran as high as 4 percent last December.

Below the fold, you can read an iconic assessment of GDP as a gauge.

Because of the flaws in the way it measures economic activity, it's important to use the GDP in conjunction with other economic factors when measuring the economy's health. Robert F. Kennedy's assessment in 1968 still resonates:

"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things.  Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.  It counts special locks for our doors and the jails for the people who break them.  It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.  It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities.  It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.  Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play.  It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.  It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.  And it can tell us everything about America except why we are proud that we are Americans."
Inadequacies in the GDP gauge have spurred efforts to develop a better measure or supplements to it. These include France's Commission on the Measurement of Economic Performance and Social Progress, Canada's Genuine Progress Index (a version of which has recently been tried out in Maryland), the Human Development Index and the Gini coefficient.
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Comment Preferences

  •  Tip Jar (17+ / 0-)

    Don't tell me what you believe, show me what you do and I will tell you what you believe.

    by Meteor Blades on Thu Nov 07, 2013 at 08:53:41 AM PST

  •  Rising inventories is bad (8+ / 0-)

    I remember back in 2007 and early 2008 that you could watch the inventory levels rise as the recession deepened.

      One way or another, rising inventories means future production cutbacks and layoffs.
      Unless consumers suddenly started getting paid more and thus can afford to spend more....yea, right.

    None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

    by gjohnsit on Thu Nov 07, 2013 at 08:59:47 AM PST

  •  Thanks for reminding us of the deficiencies (2+ / 0-)
    Recommended by:
    Eric Nelson, HeyMikey

    in GDP.  It has always bugged me that the field of economics insists on using measurements of consumption to measure the health of an economy and/or wealth.  Consumption is wealth dissipation.  

    Some better measurements of wealth, as you have alluded to, are measurements of greater efficiency, increases in clean energy generation, increases in forested land, cleaner air land and water from cleaner industrial practices and CO2 reductions.  

    If we really want to straighten out all this crap we really need to think about shit - Holy Shit.

    by John Crapper on Thu Nov 07, 2013 at 09:18:14 AM PST

    •  GDP seems a blunt tool for business(supply side) (3+ / 0-)
      Recommended by:
      HeyMikey, John Crapper, Meteor Blades

      ..over people (labor) and environment (earth) concerns -  it seems to me.

      It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.

       - Robert F. Kennedy's

      The OECD from 2008  and several other alternative methods of measuement written up here by By CATHERINE RAMPELL @ NYT:

        Alternatives to the G.D.P.

      The Organization for Economic Cooperation and Development has studied its own G.D.P. alternatives that take into account leisure. Others have proposed the Index of Sustainable Economic Welfare, which factors in both pollution and income distribution, and the Genuine Progress Indicator, which tries to determine if economic growth has improved a country’s welfare. Alternative efforts try to supplement or supplant traditional income-based measures with happiness-based measures. These include the Happy Planet Index, a Gross National Happiness measure and work on National Well-Being Accounts, which our Daily Economist Alan Krueger has studied extensively.
      It's seems that amongst these methods, are ideas geared toward people/enviroment/labor are the way we should be measuring the country's progress.
      Instead of what seems like to me (not an economists) to be a blunt tool or raw data that is mostly useful for wall street/Big business types needs and profit measuring than it does for every day working peoples needs and overall state of being, earth included.

      This one, The Happy Planet Index is cool:

      And this (pdf) mentions and compares several of the above ideas.
      From Stiglitz: SURVEY OF EXISTING APPROACHES TO MEASURING

      comparing things like social health, economic well being, coste of pollution, resource depletion, health security protection, quality of life, ecological footprint, personal saving rate..and much more

      A whole list of indices that I'd not considered until reading this
      .................................................

      Oops, I just now got to the bottom of the Diary and realized the list of alternative solution listed:

      These include France's Commission on the Measurement of Economic Performance and Social Progress, Canada's Genuine Progress Index (a version of which has recently been tried out in Maryland), the Human Development Index and the Gini coefficient.
      So hope my additions hit some good stuff too.
      .................................................

      Thx MB

  •  If your diary just had the intro paragraph (2+ / 0-)
    Recommended by:
    HeyMikey, John Crapper

    and not the additional qualifiers you wrote about in the "below the fold" section, I could have just taken the whole diary and smashed it against the screen, poured my coffee over it and drowned my keyboard into a wet mess, making my computer unusable. At least then I had a good excuse not to read the stuff I really don't want to know anything anymore about, because it really, really doesn't help me to know about any of those numbers.

    Sigh. Thanks anyway, of course. I am just venting, I know to respect and admire your reporting. No offense.

  •  We don't want better measure of how we're doing... (3+ / 0-)
    Recommended by:
    Eric Nelson, John Crapper, JesseCW

    ...because it would tell us the truth.

    Thank you, MB.

    Awesome RFK quote, too.

    "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

    by HeyMikey on Thu Nov 07, 2013 at 12:15:47 PM PST

  •  Previous 8 quarters (2 yrs) (0+ / 0-)

    were trending down, 2% down to 1.6% annually, IIRC.

    Maybe not good news, its certainly less depressing than the previous 2 years.

    With the sequester flushing 1.6 million jobs down the tubes, lets see what the next quarter brings. Since none of the fundamentals have really changed, I expect more sub 2% quarters.

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Thu Nov 07, 2013 at 12:31:24 PM PST

  •  I'm having an increasingly hard time understanding (0+ / 0-)

    why the bottom 90% of us are supposed to care very much about the GDP.

    We haven't seen a piece of its growth since 2007

    "But the traitors will pretend / that it's gettin' near the end / when it's beginning" P. Ochs

    by JesseCW on Fri Nov 08, 2013 at 07:51:59 AM PST

    •  Unemployment is high because GDP growth is low (0+ / 0-)

      lower unemployment increases the total income of the lower 90%.  

      Incomes for the lower 90% typically increase faster when unemployment is low.

      The well being of the lower 90% is hurt by weak economic growth.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Fri Nov 08, 2013 at 09:34:50 AM PST

      [ Parent ]

      •  GDP has grown greatly in the last 5 years (0+ / 0-)

        with very little corresponding job growth.

        90% of those net jobs that have been created are very low wage service jobs.

        This is not the 1970's.

        "But the traitors will pretend / that it's gettin' near the end / when it's beginning" P. Ochs

        by JesseCW on Fri Nov 08, 2013 at 06:59:39 PM PST

        [ Parent ]

        •  What data are you looking at? (0+ / 0-)

          The most useful standard GDP metric for a topic like this is real per capital GDP growth.  For the past 5 years this has been exceptionally week.

          This is especially weak considering that after a recession the economy usually goes through growth much faster than usual. This unfortunately has not happened the past 5 years.

          See http://data.worldbank.org/...

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Fri Nov 08, 2013 at 10:41:32 PM PST

          [ Parent ]

          •  GDP is beyond pre-crash levels. (0+ / 0-)

            Employment is nowhere near pre-crash levels.

            Every recession of the last 30 years has left us with fewer living wage jobs when the "recovery" was over, even as GDP has climbed higher and higher.

            This isn't new

            http://www.theatlantic.com/...

            GDP has become decoupled from US employment.  

            Productivity has continued to skyrocket, boom or bust, while workers have seen none of the gains since Reagan was elected.

            The average person, and I'm talking here about real people in the bottom 90%  people who matter and who aren't grifters but producers of real wealth, has no reason to care about that metric anymore than we do to care about the DOW.

            The Moneyed Classes "recover", the rest of us have just been going one step forward and three back.

            "But the traitors will pretend / that it's gettin' near the end / when it's beginning" P. Ochs

            by JesseCW on Fri Nov 08, 2013 at 11:22:54 PM PST

            [ Parent ]

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