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U.S. GDP grows 2.6 percent in Q3

Revised Q2 GDP growth slips from 2.5 to 1.7 percent.

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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 2.6 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 2.5 percent.

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

The acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in imports and an acceleration in private inventory investment that were partly offset by a downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.

Motor vehicle output added 0.49 percentage point to the third-quarter change in real GDP after subtracting 0.06 percentage point from the second-quarter change. Final sales of computers added 0.29 percentage point to the third-quarter change in real GDP after adding 0.03 percentage point to the second-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.7 percent in the third quarter, 0.1 percentage point less than the second estimate; this index increased 0.1 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 0.4 percent in the third quarter, compared with an increase of 0.8 percent in the second.
 

Real personal consumption expenditures increased 2.4 percent in the third quarter, compared with an increase of 2.2 percent in the second. Real nonresidential fixed investment increased 10.0 percent, compared with an increase of 17.2 percent. Nonresidential structures decreased 3.5 percent, compared with a decrease of 0.5 percent. Equipment and software increased 15.4 percent, compared with an increase of 24.8 percent. Real residential fixed investment decreased 27.3 percent, in contrast to an increase of 25.7 percent.

Real exports of goods and services increased 6.8 percent in the third quarter, compared with an increase of 9.1 percent in the second. Real imports of goods and services increased 16.8 percent, compared with an increase of 33.5 percent.

Real federal government consumption expenditures and gross investment increased 8.8 percent in the third quarter, compared with an increase of 9.1 percent in the second. National defense increased 8.5 percent, compared with an increase of 7.4 percent. Nondefense increased 9.5 percent, compared with an increase of 12.8 percent. Real state and local government consumption expenditures and gross investment increased 0.7 percent, compared with an increase of 0.6 percent.

The change in real private inventories added 1.61 percentage points to the third-quarter change in real GDP, after adding 0.82 percentage point to the second-quarter change. Private businesses increased inventories $121.4 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first.

Real final sales of domestic product -- GDP less change in private inventories -- increased 0.9 percent in the third quarter, the same increase as in the second.

Gross domestic purchases
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 4.2 percent in the third quarter, compared with an increase of 5.1 percent in the second.

Gross national product
Real gross national product -- the goods and services produced by the labor and property
supplied by U.S. residents -- increased 2.3 percent in the third quarter, compared with an increase of 1.8 percent in the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $7.1 billion in the third quarter after increasing $3.7 billion in the second; in the third quarter, receipts increased $5.9 billion, and payments increased $13.0 billion.

Current-dollar GDP
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 4.6 percent, or $166.4 billion, in the third quarter to a level of $14,745.1 billion. In the second quarter, current-dollar GDP increased 3.7 percent, or $132.3 billion.

Corporate Profits
Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) increased $26.0 billion in the third quarter, compared with an increase of $47.5 billion in the second quarter. Current-production cash flow (net cash flow with inventory valuation adjustment) -- the internal funds available to corporations for investment -- decreased $68.4 billion in the third quarter, in contrast to an increase of $61.1 billion in the second.

Taxes on corporate income increased $23.8 billion in the third quarter, compared with an increase of $2.4 billion in the second. Profits after tax with inventory valuation and capital consumption adjustments increased $2.2 billion in the third quarter, compared with an increase of $45.2 billion in the second. Dividends increased $8.1 billion, the same increase as in the second quarter; current-production undistributed profits decreased $5.9 billion in the third quarter, in contrast to an increase of $37.1 billion in the second.

Domestic profits of financial corporations increased $34.6 billion in the third quarter, in contrast to a decrease of $3.4 billion in the second. Domestic profits of nonfinancial corporations increased $0.3 billion in the third quarter, compared with an increase of $48.2 billion in the second. In the third quarter, real gross value added of nonfinancial corporations decreased. Profits per unit of real value added were unchanged; an increase in unit prices was offset by increases in both the unit labor costs and the unit nonlabor costs corporations incurred.

The rest-of-the-world component of profits decreased $8.9 billion in the third quarter, in contrast to an increase of $2.8 billion in the second. This measure is calculated as (1) receipts by U.S. residents of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. The third-quarter decrease was accounted for by a larger increase in payments than in receipts.

Profits before tax with inventory valuation adjustment is the best available measure of industry profits because estimates of the capital consumption adjustment by industry do not exist. This measure reflects depreciation-accounting practices used for federal income tax returns. According to this measure, domestic profits of financial corporations increased and profits of nonfinancial corporations decreased. The slight decrease in nonfinancial reflected decreases in wholesale trade and in manufacturing that were largely offset by increases in "other" nonfinancial industries and in information.
Within manufacturing, the decrease primarily reflected a large decrease in petroleum and coal products that was partly offset by increases in most of the other detailed manufacturing industries shown.

Profits before tax increased $57.5 billion in the third quarter, compared with an increase of $15.3 billion in the second. The before-tax measure of profits does not reflect, as does profits from current production, the capital consumption and inventory valuation adjustments. These adjustments convert depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to the current-cost measures used in the national income and product accounts. The capital consumption adjustment increased $1.4 billion in the third quarter (from -$170.7 billion to -$169.3 billion), in contrast to a decrease of $0.8 billion in the second. The inventory valuation adjustment decreased $32.9 billion (from -$3.5 billion to -$36.4 billion), in contrast to an increase of $32.9 billion.

Effective with this release, chained-dollar gross value added of nonfinancial corporate business was revised beginning with 1929. Chained-dollar gross value added is derived by deflating current dollar gross value added by a revised chain-type price index for nonfinancial industries from the annual revision of BEA’s industry accounts that was released this month.