The Bureau of Economic Analysis revised its third quarter 2011 estimate for real GDP growth to 2 percent, down from its earlier estimate of 2.5 percent growth. The downward revisions were mainly due to lower inventories, business investment and consumer spending than originally thought.
Still, the largest contributor to real GDP growth in the third quarter was consumption, adding 1.63 percentage points to growth. The consumption of durable goods contributed 0.41 percentage points, rebounding from the negative contribution in the second quarter. Nondurable goods consumption subtracted 0.11 percentage points in the third quarter, with many sectors still showing weaknesses. There is more recent evidence, though, that these weaknesses are beginning to subside.
Net exports were another positive influence on economic growth in the third quarter, adding 0.49 percentage points to the final figure. The export of goods accounted for 0.48 percentage points of that number, with the import of goods subtracting 0.04 percentage points. In essence, the growth of real exports significantly outpaced increases in real imports (up 4.3 percent versus 0.5 percent from the previous quarter).
The business investment picture was mixed, with large increases in fixed capital and residential investment being offset by reductions in nonfarm business inventories. As a whole, these provided a slight drag on real GDP. Similarly, government spending provided a negative contribution to growth, mainly from reduced expenditures in nondefense spending at the federal level and continued declines in state and local spending.
Overall, these numbers suggest that the U.S. economy has grown just 1.5 percent over the past year. I have forecast that the economy will grow by at least one percentage point more than that in 2012, and yet it is clear that the economic recovery has been subpar. These rates of growth will not be enough to generate sufficient net new employment.
We desperately need pro-growth policies from Washington that will allow manufacturers to grow and help get the rest of the economy growing at a faster rate to create jobs.
Chad Moutray is chief economist, National Association of Manufacturers.