Real economic growth increased by 1.8 percent in the third quarter of 2011, according to the Bureau of Economic Analysis. This is down from earlier estimates of 2.0 and 2.5 percent growth. This most recent revision was mostly due to lower consumer spending than earlier reported.
Consumption contributed 1.24 percentage points to real gross domestic product (GDP), making it the largest contributor to growth in the quarter, and yet, this is down from the 1.63 percentage points from the November estimate.
On the positive side, the change in inventories was less negative than earlier estimates, helping to lift its overall impact to GDP. As reported in the previous releases, the business investment picture was mixed in the third quarter, with large increases in fixed capital spending and residential investment being offset by reductions in nonfarm business inventories.
Net exports were a positive influence, but government spending – particularly at the state and local level – continues to be a drag on growth.
Overall, the fact that these numbers were lowered is disappointing, but it is important to keep it in perspective. We have seen several indicators in the fourth quarter which suggest much stronger growth more recently. I have predicted 2.4 percent growth in the fourth quarter, but other economists have pegged growth much higher than that, perhaps with real GDP up over 3 percent.
We will be watching for the first estimates of fourth quarter GDP to see if these growth rates materialize. They will be released on January 27.
Chad Moutray is chief economist, National Association of Manufacturers.
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