U.S. Economy Up ‘Less Than Half’ Of Second Quarter, Consumer Spending Slows

The nation’s choppy economy continued to grow in the third quarter, but expanded less than half the real gross domestic product in the previous quarter, according to the “advance” estimate released by the Bureau of Economic Analysis (BEA) on Thursday (Oct. 29).

The new GDP report shows that third quarter real GDP growth of 1.5% is well behind GDP growth of 3.9% in the second quarter, but slightly ahead of the final GDPNow model forecast of 1.1% projected by the Atlanta Fed on Oct. 28.

The report follow’s Wednesday’s Federal Open Market Committee meeting where Fed chair Janet Yellen and the nation’s monetary policy panel reaffirmed their  view that the current zero to 1/4% interest rate range for federal funds remains appropriate.

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2% inflation,” the FOMC said in a statement. “This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

According to the BEA, the deceleration in real GDP in the third quarter primarily reflected a downturn in downturn in private inventory investment and slowdowns in exports, nonresidential fixed investment, personal consumption spending, state and local spending and residential fixed investment.

Following are other key points of the third quarter GDP advance report.
• Real gross domestic purchases (purchases by U.S. residents of goods and services wherever produced) increased 1.5% in the third quarter, compared with an increase of 3.6% in the second.

• Current-dollar GDP (the market value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production) increased 2.7%, or $121.1 billion, in the third quarter to a level of $18 trillion. In the second quarter, current-dollar GDP increased 6.1%, or $264.4 billion.

• Current-dollar personal income increased $171.6 billion in the third quarter, compared with an increase of $139.5 billion in the second. The acceleration in personal income is primarily reflected acceleration in wages and salaries and an upturn in farm proprietors’ income that were partly offset by a deceleration in personal interest income.

• Personal current taxes increased $15.8 billion in the third quarter, compared with an increase of $27.3 billion in the second.

• Disposable personal income increased $155.9 billion, or 4.8%, in the third quarter, compared with an increase of $112.2 billion, or 3.4%, in the second. Real disposable personal income increased 3.5%, compared with an increase of 1.2%.

• Personal outlays increased $136.6 billion in the third quarter, compared with an increase of $182.3 billion in the second.

• Personal saving (disposable personal income less personal outlays) was $636.7 billion in the third quarter, compared with $617.5 billion in the second.

• The personal saving rate (personal saving as a percentage of disposable personal income) was 4.7% in the third quarter, compared with an increase of 4.6% in the second.

The third-quarter advance estimate released Thursday is based on incomplete source data that is subject to further revision by the BEA. The “second” estimate for the third quarter, based on more complete data, will be released on Nov. 24, 2015.