Better Late Than Never — The U.S. Economy in 3rd Quarter Grew At 5% Rate Above Historic Trend of 3.2% — Federal Reserve Has No Exit Strategy — Will Keep On Printing Money Next Year –Videos
Posted on December 23, 2014. Filed under: American History, Banking, Blogroll, British History, College, Documentary, Economics, Education, Energy, Federal Communications Commission, Federal Government, Federal Government Budget, Fiscal Policy, Freedom, government, government spending, history, History of Economic Thought, Illegal, Immigration, Inflation, Investments, Legal, Macroeconomics, Microeconomics, Monetary Policy, Money, Natural Gas, Oil, Tax Policy | Tags: 3rd Quarter 2014, DOW 18000, Dow Jones, GDP, Gross Domestic Product |
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U.S. Economy Grew 5% in Third Quarter, Its Fastest Rate in More Than a Decade
By NELSON D. SCHWARTZ
The American economy grew last quarter at its fastest rate in more than a decade, providing the strongest evidence to date that the recovery is finally gaining sustained power more than five years after it began.
Bolstered by robust spending among consumers and businesses alike, economic output rose at an annual rate of 5 percent during the summer months, the Commerce Department said Tuesday, a sharp revision from its earlier estimate of 3.9 percent. The advance followed a second quarter where growth reached a rate of 4.6 percent after a decline last winter that was exacerbated by particularly harsh weather.
The revision was led by an upswing in investment by businesses, a force for growth in most economic recoveries but one that has lagged in the latest rebound. Higher consumer spending and a healthier trade balance also helped. The gain makes the third quarter the strongest since the summer of 2003.
Although the growth rate is expected to decelerate somewhat in the current fourth quarter, the improved view in the rearview mirror corresponds with other evidence suggesting that the economy is moving to a higher gear.
“The data today is very consistent with a U.S. consumer that is doing quite well,” said Michael Gapen, chief United States economist at Barclays. “Consumers are receiving a boost in the form of lower gas prices but they are also feeling more confident about their own futures because of the stronger labor market.”
In a separate Commerce Department report Tuesday morning, the government reported that personal spending jumped 0.6 percent in November, slightly more than expected, while October’s increase was revised upward by 0.1 percentage point to 0.3 percent. Personal income jumped by 0.4 percent in November, the Commerce Department said, ahead of the 0.3 percent rise in October and the 0.2 percent increase in September.
Unemployment has been steadily falling, and payrolls grew by more than 300,000 last month, a significantly better-than-expected reading. Similarly, consumers have gotten a big boost recently from the steep fall in gas prices since the summer. That is expected to lift holiday retail sales this month.
“Consumption growth appears to have accelerated further in Q4, with plunging gasoline prices shifting upside to more discretionary areas,” Ted Wieseman, an economist with Morgan Stanley, said in a note to clients after the revised figures on economic growth were released.
The final Thomson Reuters/University of Michigan survey of consumer sentiment, also released Tuesday morning, recorded a small decrease to 93.6 from a preliminary 93.8 report. That still left overall consumer expectations in the survey are at their best levels since Jan. 2007, a year before the last recession began.
Despite signs of faster growth, the Federal Reserve remains cautious about raising short-term interest rates from near zero, where they have been since the depths of the financial crisis in 2008.
The central bank is expected to raise rates in mid-2015, but signaled last week that it would remain patient in order to confirm that faster growth looks sustainable and will translate into increased hiring over the long term.
The better-than-expected data Tuesday morning prompted some experts to quickly revise their forecasts for growth in the fourth quarter upward. Macroeconomic Advisers, for example, lifted its estimate of fourth quarter growth to 2.8 percent from an earlier forecast of 2.6 percent, while Goldman Sachs bumped its forecast to 2.6 percent from 2.2 percent.
* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.
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Gross Domestic Product: Third Quarter 2014 (Third Estimate)
Corporate Profits: Third Quarter 2014 (Revised Estimate)
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 5.0 percent in the third quarter of 2014, according to the "third" 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 "second" estimate issued last month. In the second estimate, the increase in real GDP was 3.9 percent. With the third estimate for the third quarter, both personal consumption expenditures (PCE) and nonresidential fixed investment increased more than previously estimated (see "Revisions" on page 3). The increase in real GDP in the third quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, exports, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased. The acceleration in the percent change in real GDP reflected a downturn in imports, an upturn in federal government spending, and an acceleration in PCE that were partly offset by a downturn in private inventory investment and decelerations in exports, in state and local government spending, in residential fixed investment, and in nonresidential fixed investment. _______ FOOTNOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to-quarter dollar changes are differences between these published estimates. Percent changes are calculated from unrounded data and are annualized. "Real" estimates are in chained (2009) dollars. Price indexes are chain-type measures. This news release is available on BEA's Web site along with the Technical Note and Highlights related to this release. For information on revisions, see "The Revisions to GDP, GDI, and Their Major Components" _______ The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.4 percent in the third quarter, unrevised from the second 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. Real personal consumption expenditures increased 3.2 percent in the third quarter, compared with an increase of 2.5 percent in the second. Durable goods increased 9.2 percent, compared with an increase of 14.1 percent. Nondurable goods increased 2.5 percent, compared with an increase of 2.2 percent. Services increased 2.5 percent, compared with an increase of 0.9 percent. Real nonresidential fixed investment increased 8.9 percent in the third quarter, compared with an increase of 9.7 percent in the second. Investment in nonresidential structures increased 4.8 percent, compared with an increase of 12.6 percent. Investment in equipment increased 11.0 percent, compared with an increase of 11.2 percent. Investment in intellectual property products increased 8.8 percent, compared with an increase of 5.5 percent. Real residential fixed investment increased 3.2 percent, compared with an increase of 8.8 percent. Real exports of goods and services increased 4.5 percent in the third quarter, compared with an increase of 11.1 percent in the second. Real imports of goods and services decreased 0.9 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 1.1 percent, compared with an increase of 3.4 percent. The change in real private inventories subtracted 0.03 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 $82.2 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 5.0 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 4.1 percent in the third quarter, compared with an increase of 4.8 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 5.3 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 increased $13.3 billion in the third quarter, compared with an increase of $1.4 billion in the second; in the third quarter, receipts increased $13.2 billion, and payments increased less than $0.1 billion. Current-dollar GDP Current-dollar GDP -- the market value of the production of goods and services in the United States -- increased 6.4 percent, or $271.6 billion, in the third quarter to a level of $17,599.8 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 output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 4.7 percent in the third quarter, compared with an increase of 4.0 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. Revisions The upward revision to the percent change in real GDP primarily reflected upward revisions to PCE, to nonresidential fixed investment, and to private inventory investment. Advance Estimate Second Estimate Third Estimate (Percent change from preceding quarter) Real GDP............................... 3.5 3.9 5.0 Current-dollar GDP..................... 4.9 5.3 6.4 Real GDI............................... -- 4.5 4.7 Gross domestic purchases price index... 1.3 1.4 1.4 Corporate Profits Profits from current production Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $64.5 billion in the third quarter, compared with an increase of $164.1 billion in the second. Profits of domestic financial corporations increased $16.1 billion in the third quarter, compared with an increase of $33.3 billion in the second. Profits of domestic nonfinancial corporations increased $32.0 billion, compared with an increase of $134.3 billion. The rest-of-the-world component of profits increased $16.5 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 increased $14.4 billion, and payments decreased $2.1 billion. Taxes on corporate income decreased $5.5 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 $70.1 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 $73.9 billion, compared with an increase of $118.8 billion. Net cash flow with IVA -- the internal funds available to corporations for investment -- increased $46.9 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. IVA increased $16.7 billion in the third quarter, compared with an increase of $11.9 billion in the second. CCAdj increased $0.9 billion, in contrast to a decrease of $0.8 billion. Corporate profits with IVA Profits of domestic financial corporations increased $16.2 billion in the third quarter, compared with an increase of $33.7 billion in the second. Profits of domestic nonfinancial corporations increased $31.1 billion, compared with an increase of $134.7 billion. The increase in profits of financial corporations primarily reflected an increase in "other" financial industries. The increase in profits of nonfinancial corporations primarily reflected increases in manufacturing, in wholesale trade, and in "other" nonfinancial industries that were partly offset by a decrease in information. Within manufacturing, the increase was widespread; the largest increase was in "other" durable goods industries. The largest offset was a decrease in chemical products. Gross value added of nonfinancial domestic corporate business In the third quarter, both real gross value added of nonfinancial corporations and profits per unit of real gross value added increased. The increase in unit profits reflected an increase in unit prices and a decrease in unit labor costs that were partly offset by an increase in unit nonlabor costs. * * * BEA's national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA's Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements. * * * Next release -- January 30, 2015 at 8:30 A.M. EST for: Gross Domestic Product: Fourth Quarter and Annual 2014 (Advance Estimate) Release dates in 2015 Gross Domestic Product 2014: IV and 2014 annual 2015: I 2015: II 2015: III Advance.... January 30 April 29 July 30 October 29 Second..... February 27 May 29 August 27 November 24 Third...... March 27 June 24 September 25 December 22 Corporate Profits Preliminary... .. May 29 August 27 November 24 Revised....... March 27 June 24 September 25 December 22 http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm