The Bureau of Economic Analysis revised its figure for third quarter real gross domestic product (GDP) to 3.1 percent, up from last month’s estimate of 2.7 percent and the original estimate of 2.0 percent. This reflects higher consumer spending on services, increased net exports, and a now-positive contribution from state and local spending.
Overall, the consumer, housing, end-of-fiscal year federal government spending, inventory replenishment, and net exports were the main contributors to the faster pace of growth in the third quarter. The primary drag was nonresidential fixed investment, with manufacturers and other businesses anxious about slowing sales and the fiscal cliff. This uncertainty led to business investment subtracting 0.23 percentage points from real GDP, with reduced spending on equipment and software the primary factor.
This sluggishness has continued in the current (or fourth) quarter, with growth expected to slow to around 2 percent or less.
Chad Moutray is the chief economist, National Association of Manufacturers.