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U.S. GDP grows 3.9 percent in Q3

Personal spending, residential and nonresidential fixed investment, government spending and exports are main drivers.


Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 3.9 percent in the third quarter of 2014, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.6 percent.

The GDP estimate released today is 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 3.5 percent. With the second estimate for the third quarter, private inventory investment decreased less than previously estimated, and both personal consumption expenditures (PCE) and nonresidential fixed investment increased more. In contrast, exports increased less than previously estimated (see "Revisions" on page 3).

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

The deceleration in the percent change in real GDP reflected a downturn in private inventory investment and decelerations in exports, in nonresidential fixed investment, in state and local government spending, in PCE, and in residential fixed investment that were partly offset by a downturn in imports and an upturn in federal government spending.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.4 percent in the third quarter, 0.1 percentage point more than in the advance estimate; this index increased 2.0 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.6 percent in the third quarter, compared with an increase of 1.7 percent in the second.

Real personal consumption expenditures increased 2.2 percent in the third quarter, compared with an increase of 2.5 percent in the second. Durable goods increased 8.7 percent, compared with an increase of 14.1 percent. Nondurable goods increased 2.2 percent, the same increase as in the second quarter. Services increased 1.2 percent, compared with an increase of 0.9 percent.

Real nonresidential fixed investment increased 7.1 percent in the third quarter, compared with an increase of 9.7 percent in the second. Investment in nonresidential structures increased 1.1 percent, compared with an increase of 12.6 percent. Investment in equipment increased 10.7 percent, compared with an increase of 11.2 percent. Investment in intellectual property products increased 6.4 percent, compared with an increase of 5.5 percent.

Real residential fixed investment increased 2.7 percent, compared with an increase of 8.8 percent.

Real exports of goods and services increased 4.9 percent in the third quarter, compared with an increase of 11.1 percent in the second. Real imports of goods and services decreased 0.7 percent, in contrast to an increase of 11.3 percent.

Real federal government consumption expenditures and gross investment increased 9.9 percent in the third quarter, in contrast to a decrease of 0.9 percent in the second. National defense increased 16.0 percent, compared with an increase of 0.9 percent. Nondefense increased 0.4 percent, in contrast to a decrease of 3.8 percent.

Real state and local government consumption expenditures and gross investment increased 0.8 percent, compared with an increase of 3.4 percent.

The change in real private inventories subtracted 0.12 percentage point from the third-quarter change in real GDP after adding 1.42 percentage points to the second-quarter change. Private businesses increased inventories $79.1 billion in the third quarter, following increases of $84.8 billion in the second quarter and $35.2 billion in the first.

Real final sales of domestic product -- GDP less change in private inventories -- increased 4.1 percent in the third quarter, compared with an increase of 3.2 percent in the second.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 3.0 percent in the third quarter, compared with an increase of 4.8 percent in the second.

Gross national product

Real gross national product -- the value of the goods and services produced by the labor and property supplied by U.S. residents -- increased 3.8 percent in the third quarter, compared with an increase of 4.6 percent in the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $1.6 billion in the third quarter, in contrast to an increase of $1.4 billion in the second; in the third quarter, receipts decreased $1.1 billion, and payments increased $0.5 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the production of goods and services in the United States -- increased 5.3 percent, or $227.0 billion, in the third quarter to a level of $17,555.2 billion. In the second quarter, current-dollar GDP increased 6.8 percent, or $284.2 billion.

Gross domestic income

Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned on that production, increased 4.5 percent in the third quarter, compared with an increase of 4.0 percent (revised) 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.

Profits from current production

Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $43.8 billion in the third quarter, compared with an increase of $164.1 billion in the second.

Profits of domestic financial corporations increased $20.3 billion in the third quarter, compared with an increase of $33.3 billion in the second. Profits of domestic nonfinancial corporations increased $22.5 billion, compared with an increase of $134.3 billion. The rest-of-the-world component of profits increased $1.0 billion, in contrast to a decrease of $3.6 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the third quarter, receipts were unchanged, and payments decreased $1.0 billion.

Taxes on corporate income decreased $4.8 billion in the third quarter, in contrast to an increase of $45.7 billion in the second. Profits after tax with IVA and CCAdj increased $48.6 billion, compared with an increase of $118.4 billion.

Dividends decreased $3.9 billion in the third quarter, compared with a decrease of $0.5 billion in the second. Undistributed profits increased $52.5 billion, compared with an increase of $118.8 billion. Net cash flow with IVA -- the internal funds available to corporations for investment -- increased $25.1 billion, compared with an increase of $133.4 billion.

The IVA and CCAdj are adjustments that convert inventory withdrawals and depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic measures used in the national income and product accounts. The IVA increased $16.8 billion in the third quarter, compared with an increase of $11.9 billion in the second. The CCAdj increased $1.2 billion, in contrast to a decrease of $0.8 billion.

Gross value added of nonfinancial domestic corporate business

In the third quarter, real gross value added of nonfinancial corporations increased, and profits per unit of real gross value added increased. The increase in unit profits reflected an increase in unit prices that was partly offset by an increase in unit nonlabor costs; unit labor costs were unchanged.

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