EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, THURSDAY, OCTOBER 30, 2008
Gross Domestic Product, Third Quarter 2008 (advance)
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.3 percent in the third quarter of 2008, (that is, from the second quarter to the third quarter), according to advance estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.8 percent. The Bureau emphasized that the third-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The third- quarter "preliminary" estimates, based on more comprehensive data, will be released on November 25, 2008. The decrease in real GDP in the third quarter primarily reflected negative contributions from personal consumption expenditures (PCE), residential fixed investment, and equipment and software that were largely offset by positive contributions from federal government spending, exports, private inventory investment, nonresidential structures, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased. Most of the major components contributed to the downturn in real GDP growth in the third quarter. The largest contributors were a sharp downturn in PCE for nondurable goods, a smaller decrease in imports, a larger decrease in PCE for durable goods, and a deceleration in exports. Notable offsets were an upturn in inventory investment and an acceleration in federal government spending. Final sales of computers contributed 0.06 percentage point to the third-quarter change in real GDP after contributing 0.17 percentage point to the second-quarter change. Motor vehicle output contributed 0.09 percentage point to the third-quarter change in real GDP after subtracting 1.01 percentage points from the second-quarter change. 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 (2000) 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. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 4.8 percent in the third quarter, compared with an increase of 4.2 percent in the second. Excluding food and energy prices, the price index for gross domestic purchases increased 3.1 percent in the third quarter, compared with an increase of 2.2 percent in the second. Real personal consumption expenditures decreased 3.1 percent in the third quarter, in contrast to an increase of 1.2 percent in the second. Durable goods decreased 14.1 percent, compared with a decrease of 2.8 percent. Nondurable goods decreased 6.4 percent, in contrast to an increase of 3.9 percent. Services expenditures increased 0.6 percent, compared with an increase of 0.7 percent. Real nonresidential fixed investment decreased 1.0 percent in the third quarter, in contrast to an increase of 2.5 percent in the second. Nonresidential structures increased 7.9 percent, compared with an increase of 18.5 percent. Equipment and software decreased 5.5 percent, compared with a decrease of 5.0 percent. Real residential fixed investment decreased 19.1 percent, compared with a decrease of 13.3 percent. Real exports of goods and services increased 5.9 percent in the third quarter, compared with an increase of 12.3 percent in the second. Real imports of goods and services decreased 1.9 percent, compared with a decrease of 7.3 percent. Real federal government consumption expenditures and gross investment increased 13.8 percent in the third quarter, compared with an increase of 6.6 percent in the second. National defense increased 18.1 percent, compared with an increase of 7.3 percent. Nondefense increased 4.8 percent, compared with an increase of 5.0 percent. Real state and local government consumption expenditures and gross investment increased 1.4 percent, compared with an increase of 2.5 percent. The real change in private inventories added 0.56 percentage point to the third-quarter change in real GDP after subtracting 1.50 percentage points from the second-quarter change. Private businesses decreased inventories $38.5 billion in the third quarter, following a decrease of $50.6 billion in the second quarter and a decrease of $10.2 billion in the first. Real final sales of domestic product -- GDP less the change in private inventories -- decreased 0.8 percent in the third quarter, in contrast to an increase of 4.4 percent in the second. Gross domestic purchases Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- decreased 1.3 percent in the third quarter, compared with a decrease of 0.1 percent in the second. Disposition of personal income Current-dollar personal income increased $31.0 billion (1.0 percent) in the third quarter, compared with an increase of $228.4 billion (7.9 percent) in the second. The deceleration primarily reflected a downturn in personal current transfer receipts due to the effects of the second-quarter rebates to individuals who pay no income taxes (or for whom the rebate exceeded the amount of taxes they pay) from the Economic Stimulus Act of 2008. Personal current taxes increased $133.4 billion in the third quarter, in contrast to a decrease of $180.9 billion in the second. The sharp upturn reflected the second-quarter rebates to individuals with tax liabilities, which were treated as an offset to taxes. Disposable personal income decreased $102.4 billion (3.7 percent) in the third quarter, in contrast to an increase of $409.3 billion (16.7 percent) in the second. Real disposable personal income decreased 8.7 percent, in contrast to an increase of 11.9 percent. Personal outlays increased $54.5 billion (2.1 percent) in the third quarter, compared with an increase of $133.3 billion (5.2 percent) in the second. Personal saving -- disposable personal income less personal outlays -- was $139.7 billion in the third quarter, compared with $296.6 billion in the second. The personal saving rate -- saving as a percentage of disposable personal income -- was 1.3 percent in the third quarter, compared with 2.7 percent in the second. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on "Personal Saving" on BEA's Web site. For a comparison of personal saving in BEA's national income and product accounts with personal saving in the Federal Reserve Board's flow of funds accounts and data on changes in net worth (which helps finance negative saving), go to /bea/dn/nipaweb/Nipa-Frb.asp. Current-dollar GDP Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 3.8 percent, or $134.7 billion, in the third quarter to a level of $14,429.2 billion. In the second quarter, current-dollar GDP increased 4.1 percent, or $143.7 billion. BOX-- Information on the assumptions used for unavailable source data is provided in a technical note that is posted with the news release on BEA's Web site. Within a few days after the release, a detailed "Key Source Data and Assumptions" file is posted on the Web site. In the middle of each month, an analysis of the current quarterly estimates of GDP and related series is made available on the Web site; click on Survey of Current Business, "GDP and the Economy." ----- * * * 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 -- November 25, 2008, at 8:30 A.M. EST for: Gross Domestic Product: Third Quarter 2008 (Preliminary) Corporate Profits: Third Quarter 2008 (Preliminary) Comparisons of Revisions to GDP Quarterly estimates of GDP are released on the following schedule: "Advance" estimates, based on source data that are incomplete or subject to further revision by the source agency, are released near the end of the first month after the end of the quarter; as more detailed and more comprehensive data become available, "preliminary" and "final" estimates are released near the end of the second and third months, respectively. The "latest" estimates reflect the results of both annual and comprehensive revisions. Annual revisions, which cover the quarters of the 3 most recent calendar years, are usually carried out each summer and incorporate newly available major annual source data. Comprehensive (or benchmark) revisions are carried out at about 5-year intervals and incorporate major periodic source data, as well as improvements in concepts and methods that update the accounts to portray more accurately the evolving U.S. economy. The table below shows comparisons of the revisions between quarterly percent changes of current-dollar and real GDP for the different vintages of the estimates. From the advance estimate to the preliminary estimate (one month later), the average revision to real GDP without regard to sign is 0.5 percentage point, while from the advance estimate to the final estimate (two months later), it is 0.6 percentage point. From the advance estimate to the latest estimate, the average revision without regard to sign is 1.2 percentage points. The average revision (with regard to sign) from the advance estimate to the latest estimate is 0.3 percentage point, which is larger than the average revisions from the advance estimate to the preliminary or to the final estimates. The larger average revisions to the latest estimate reflect the fact that comprehensive revisions include major improvements, such as the introduction of chain indexes and the capitalization of software. The quarterly estimates correctly indicate the direction of change of real GDP 98 percent of the time, correctly indicate whether GDP is accelerating or decelerating 74 percent of the time, and correctly indicate whether real GDP growth is above, near, or below trend growth more than three-fifths of the time. Revisions Between Quarterly Percent Changes of GDP: Vintage Comparisons [Annual rates] Vintages Average Average without Standard deviation of compared regard to sign revisions without regard to sign Current-dollar GDP Advance to preliminary......... 0.2 0.5 0.4 Advance to final............... .2 .7 .4 Preliminary to final........... .0 .3 .2 Advance to latest.............. .4 1.1 .9 Real GDP Advance to preliminary......... 0.1 0.5 0.4 Advance to final............... .1 .6 .4 Preliminary to final........... .0 .3 .2 Advance to latest.............. .3 1.2 1.0 NOTE.--These comparisons are based on the period from 1983 through 2005.