In each of the three months following each quarter the Commerce Department's Bureau of Economic Analysis estimates how much the gross domestic product has grown. Last month's first estimate of a 3.5% annualized rate for the third quarter brought a tremendous round of applause since it indicated robust growth was under way after four quarters deep in the red. Today, as the experts' consensus expected, Commerce announced a weaker second-round estimate, although it still reflects a sharp improvement over the second quarter. The third and final estimate will be announced in December. The calculations are revised from estimate to estimate because better data become available over time.
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 2.8 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.
The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. ...
The second estimate of the third-quarter increase in real GDP is 0.7 percentage point lower, or $23.7 billion, than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to personal consumption expenditures and to nonresidential fixed investment that were partly offset by an upward revision to exports.
Don Marron noted:
The revision was driven by three main factors: consumer spending and business investment in structures were weaker than previously estimated, while imports were stronger.
In principle, the solid growth in consumer spending and housing investment should be promising signs, given their previous weakness. However, both were boosted by temporary stimulus efforts. Cash-for-clunkers lifted consumer auto sales in Q3, for example, but we should expect some payback in Q4. Meanwhile, the tax credit for new home buyers helped housing investment record its first increase since late 2005, but some of that may have come at the expense of future housing investment (because potential home owners accelerated purchases when they thought the credit was going to expire; it’s since been extended and broadened).
Consumer spending, which makes up 70% of the economy, is credited with 2.1% of the estimated rise in GDP.
Meanwhile, the Conference Board's consumer confidence index took an unexpected, though modest, upward turn. The consensus of experts surveyed by Bloomberg had been that confidence would move downward slightly.
The Conference Board’s confidence index increased to 49.5 from 48.7 the prior month. The New York-based Conference Board’s index, which focuses on the labor market and purchase plans, averaged 58 in 2008 and 103.4 in 2007.
The report showed Americans fretted over jobs, signaling the highest unemployment rate in 26 years may restrain spending and limit the recovery from the worst recession since the 1930s. ...
"Labor market perceptions are very weak," said David Sloan, chief U.S. economist at 4Cast Inc. in New York, who forecast an increase in confidence. "What did drive is up was expectations, optimism that things will get better, not that things have gotten better."
Labor markets are indeed weak, with 10.2% officially unemployed, and 17.5% unemployed or underemployed. Overall, some 30 million Americans fall into those latter categories, the worst situation since the 1930s. The Bureau of Labor Statistics will report its latest unemployment calculations a week from Friday.
Bloomberg noted that the Conference Board’s measure of present conditions decreased to 21, the lowest level in 26 years. "The decrease reflected growing concern over unemployment with a measure of job availability reaching the lowest level since 1983."
The proportion of people who expect their incomes to rise over the next six months decreased to 10 percent from 10.7 percent. The share expecting more jobs dropped to 15.2 percent from 16.8 percent.
Buying plans for automobiles and real estate dropped this month, the report showed. Home-buying expectations decreased to the lowest level since 1982.
The Conference Board obtains its confidence figures by surveying 5000 consumers each month.