The nation’s real gross domestic production (GDP) grew at a faster clip than previously thought as business investment and state and local government spending boosted the U.S. economy in the third quarter, according to the “second” estimate released Wednesday (Nov. 29) by the Bureau of Economic Analysis (BEA).
The nation’s gross domestic product, the value of goods and services produced by the nation’s economy less the value of the goods and services used up in production, increased at an annual rate of 3.3% in the third quarter of 2017, up three percentage points from the earlier “advance” estimate of 3%. In the second quarter, real GDP grew at an annual rate of 3.1%, BEA data shows.
The improved GDP report, the strongest growth in nearly three years, follows Monday’s report by the Conference Board that U.S. consumer confidence rose for the fifth consecutive month to its highest level in 17 years, and just ahead of the U.S. Senate’s expected vote on a $1.8 trillion tax reform package. Lynn Franco, director of Economic Indicators for the Conference Board, said consumers’ assessment of current conditions improved moderately, while their expectations regarding the short-term outlook improved more so, driven primarily by optimism of further improvements in the labor market.
“Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018,” Franco said of U.S. Consumer Confidence Index, which now stands at 129.5 compared to 126.2 in October.
Overall, real gross domestic income (GDI) increased 2.5% in the third quarter, compared with a revised improvement of 2.3% in the previous quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.9% in the third quarter compared to the 2.7% in the earlier three-month period.
Current-dollar GDP increased 5.5%, or $259 billion, in the third quarter to a level of $19.5 trillion billion. That compares to current-dollar GDP improvement of 4.1%, or $192.3 billion, in the second quarter.
The price index for gross domestic purchases increased 1.8% in the third quarter, compared with 0.9% in the earlier quarter. The PCE price index increased 1.5%, compared with an increase of 0.3%. Excluding food and energy prices, the PCE price index increased 1.4%, compared with an increase of 0.9%.
As the equity markets hit new highs in New York this week, profits from current production spiked to $91.6 billion in the third quarter, up a whopping 536% from $14.4 billion in the second quarter. Profits of domestic financial corporations increased $60.6 billion in the third quarter, in contrast to a decrease of $33.8 billion in the second quarter.
Profits of domestic nonfinancial corporations increased $12.5 billion, compared with an increase of $59.1 billion. Rest-of-the-world profits increased $18.6 billion, in contrast to a decrease of $10.8 billion. In the third quarter, receipts increased $23.1 billion, and payments increased $4.6 billion.
The BEA, which is the economic analysis arm of the U.S. Commerce Department, will release its “advance” GDP estimate for the third quarter four days before Christmas. A week ago, the Atlanta Fed’s GDPNow model forecasted fourth quarter real GDP growth at 3.4%, which will give the U.S. three straight quarters of 3% economic growth, for the first time more than a decade.
The robust U.S. GDP data follows last week’s report by the BEA showing Arkansas’ non-durable manufacturing sector led a near across-the-board expansion of the state’s growing economy. Although not as impressive as the revised 4.8% and 4% real GDP growth in the fourth quarter of 2016 and first quarter of this year, respectively, Arkansas saw economic growth of 3.5% in the second quarter.
According to the BEA, Arkansas’ economy now ranks as the 14th fastest-growing state with $126.6 billion in current-dollar output. That represents about 1.7% of the total U.S. current-dollar GDP growth of $19.1 trillion in the second quarter.