Real gross domestic product (GDP), the most accurate measure of a country’s broad economic growth, defied expectations in the third quarter, showing the economy grew at an annualized pace of 4.9%, according to the latest “advance” estimate from the U.S. Commerce Dept.’s Bureau of Economic Analysis (BEA) released Thursday. In the second quarter, real GDP increased 2.1%
According to the BEA, the increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, and residential fixed investment that were partly offset by a decrease in nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were housing and utilities, health care, financial services and insurance and food services and accommodations, the report stated.
Within goods, the leading contributors to the increase were other nondurable goods (led by prescription drugs) as well as recreational goods and vehicles, the bureau reported. The increase in private inventory investment reflected increases in manufacturing and retail trade. Within nonresidential fixed investment, a decrease in equipment was partly offset by increases in intellectual property products and structures.
Compared to the second quarter, the acceleration in real GDP in the third quarter reflected accelerations in consumer spending, private inventory investment, and federal government spending and upturns in exports and residential fixed investment. These movements were partly offset by a downturn in nonresidential fixed investment and a deceleration in state and local government spending. Imports turned up.
What it means for housing:
“Today’s GDP report shows the nation’s economy is again defying the odds by growing at a rate that is much higher than expected. There are pros and cons to the report,” said CoreLogic Chief Economist Dr. Selma Hepp. “The good news is that Federal interest rate policy is slowing inflation while also keeping unemployment numbers low and consumer spending strong. On the flip side, new homebuyers will face higher mortgage payments for the foreseeable future. Furthermore, many of the only homes available to purchase are newly built, as current homeowners are staying put, with new home purchases up 12% year over year. Yet, surging mortgage rates as well as tighter financial conditions will start weighing on the economy and new home sales and will depress economic growth in the coming quarters with GDP in Q1 2024 expected at less than 2%.”
More from the Commerce Department’s BEA report:
- Current dollar GDP increased 8.5% at an annual rate, or $560.5 billion, in the third quarter to a level of $27.62 trillion.
- In the second quarter, GDP increased 3.8%, or $249.4 billion (table 1 and table 3).
- The price index for gross domestic purchases increased 3.0% in the third quarter, compared with an increase of 1.4% in the second quarter.
- The personal consumption expenditures (PCE) price index increased 2.9%, compared with an increase of 2.5%.
- Excluding food and energy prices, the PCE price index increased 2.4%, compared with an increase of 3.7%.
- Current-dollar personal income increased $199.5 billion in the third quarter, compared with an increase of $239.6 billion in the second quarter. The increase reflected increases in compensation, proprietors’ income, personal income receipts on assets, and rental income of persons that were partly offset by a decrease in personal current transfer receipts.
- Disposable personal income increased $95.8 billion, or 1.9%, in the third quarter, compared with an increase of $296.5 billion, or 6.1%, in the second quarter.
- Real disposable personal income decreased 1.0%, in contrast to an increase of 3.5%.
- Personal saving was $776.9 billion in the third quarter, compared with $1.04 trillion in the second quarter.
- The personal saving rate—personal saving as a percentage of disposable personal income—was 3.8% in the third quarter, compared with 5.2% in the second quarter.
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