SEARCH

U.S. GDP Grows at 2.0 Percent Annual Rate in Q3 2011

Growth rate improves from 1.3 percent in Q2; is driven by higher personal consumption, nonresidential fixed investment, exports and federal government spending.

---

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 2.0 percent in the third quarter of 2011 (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 increased 1.3 percent.

The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month. In the advance 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 (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

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

Final sales of computers added 0.22 percentage point to the third-quarter change in real GDP after adding 0.07 percentage point to the second-quarter change. Motor vehicle output added 0.18 percentage point to the third-quarter change in real GDP after subtracting 0.10 percentage point from the second-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.9 percent in the third quarter, 0.1 percentage point less than in the advance estimate; this index increased 3.3 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 2.7 percent in the second.

Real personal consumption expenditures increased 2.3 percent in the third quarter, compared with an increase of 0.7 percent in the second. Durable goods increased 5.5 percent, in contrast to a decrease of 5.3 percent. Nondurable goods decreased 0.6 percent, in contrast to an increase of 0.2 percent. Services increased 2.9 percent, compared with an increase of 1.9 percent.

Real nonresidential fixed investment increased 14.8 percent in the third quarter, compared with an increase of 10.3 percent in the second. Nonresidential structures increased 12.6 percent, compared with an increase of 22.6 percent. Equipment and software increased 15.6 percent, compared with an increase of 6.2 percent. Real residential fixed investment increased 1.6 percent, compared with an increase of 4.2 percent.

Real exports of goods and services increased 4.3 percent in the third quarter, compared with an increase of 3.6 percent in the second. Real imports of goods and services increased 0.5 percent, compared with an increase of 1.4 percent.

Real federal government consumption expenditures and gross investment increased 1.9 percent in the third quarter, the same increase as in the second. National defense increased 4.7 percent, compared with an increase of 7.0 percent. Nondefense decreased 3.8 percent, compared with a decrease of 7.6 percent. Real state and local government consumption expenditures and gross investment decreased 1.4 percent, compared with a decrease of 2.8 percent.

The change in real private inventories subtracted 1.55 percentage points from the third-quarter change in real GDP after subtracting 0.28 percentage point from the second-quarter change. Private businesses decreased inventories $8.5 billion in the third quarter, following increases of $39.1 billion in the second quarter and $49.1 billion in the first.

Real final sales of domestic product -- GDP less change in private inventories -- increased 3.6 percent in the third quarter, compared with an increase of 1.6 percent in the second.

Gross domestic purchases
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 1.5 percent in the third quarter, compared with an increase of 1.0 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 2.1 percent in the third quarter, compared with an increase of 2.2 percent in the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased $3.5 billion in the third quarter after increasing $28.0 billion in the second; in the third quarter, receipts decreased $11.0 billion, and payments decreased $14.5 billion.

Current-dollar GDP
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 4.6 percent, or $168.1 billion, in the third quarter to a level of $15,180.9 billion. In the second quarter, current-dollar GDP increased 4.0 percent, or $145.0 billion.

Gross domestic income
Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 0.4 percent in the third quarter after increasing 0.2 percent in the second. For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data. However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.

Corporate Profits
Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) increased $39.8 billion in the third quarter, compared with an increase of $61.2 billion in the second quarter. Current-production cash flow (net cash flow with inventory valuation adjustment) -- the internal funds available to corporations for investment -- increased $39.6 billion in the third quarter, compared with an increase of $86.2 billion in the second.

Taxes on corporate income decreased $5.6 billion in the third quarter, compared with a decrease of $1.8 billion in the second. Profits after tax with inventory valuation and capital consumption adjustments increased $45.5 billion in the third quarter, compared with an increase of $63.0 billion in the second. Dividends increased $13.3 billion, compared with an increase of $13.6 billion; current production undistributed profits increased $32.2 billion, compared with an increase of $49.3 billion.

Domestic profits of financial corporations increased $16.0 billion in the third quarter, in contrast to a decrease of $54.2 billion in the second. Domestic profits of nonfinancial corporations increased $17.4 billion in the third quarter, compared with an increase of $80.8 billion in the second. In the third quarter, real gross value added of nonfinancial corporations decreased, and profits per unit of real value added increased. The increase in unit profits reflected an increase in unit prices that was partly offset by increases in both unit labor and nonlabor costs.

The rest-of-the-world component of profits increased $6.4 billion in the third quarter, compared with an increase of $34.6 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 increase was accounted for by a smaller decrease in receipts than in payments.

Profits before tax increased $30.9 billion in the third quarter, compared with an increase of $13.5 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 decreased $4.0 billion in the third quarter (from $107.3 billion to $103.3 billion), compared with a decrease of $8.1 billion in the second. The inventory valuation adjustment increased $13.1 billion (from -$60.4 billion to -$47.3 billion), compared with an increase of $55.6 billion.