Advance Third Quarter 2011 GDP is 2.5%

by Steven Hansen and Doug Short

Advance third quarter 2011 Gross Domestic Product (GDP) is 2.5% – up from 2Q2011 GDP of 1.3%.  This was on the high side of Econintersect’s estimate and higher than the 2.1% GDP forecast by  This is an advance estimate, which is based on incomplete data and is subject to revision over the coming months.

This advance 3Q2011 2.5% is inflation adjusted and annualized – the economy only grew marginally per capita as is roughly half recovered from the trough of the great recession.

The table below compares the composition of the 2.5% advance 3Q2011 GDP.   69% (1.72% portion of the 2.5%) of 3Q2011 GDP came from consumers with the strongest growth since the end of the Great Recession coming from consumer services.

The government provided no growth to GDP.  Both imports and exports grew (exports add while imports subtract from GDP) with little net change from 2Q.  Investment continues to be a less good element of GDP.

What the BEA says about this 3rd estimate:

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment.

Final sales of computers added 0.21 percentage point to the third-quarter change in real GDP after adding 0.07 percentage point to the second-quarter change. Motor vehicle output added 0.07 percentage point to the third-quarter change in real GDP after subtracting 0.10 percentage point from the second-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 2.0 percent in the third quarter, compared with an increase of 3.3 percent in the second.  Excluding food and energy prices, the price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 2.7 percent in the second.

The bottom line summary in 3Q2011 versus 2Q2011 is there are no growth trend lines.  The only trend line is a less good trend on Gross Private Domestic Investment.  On a per capita basis, the economy is at 2005 levels.

Overview Analysis:

Here is a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I’ve also included recessions, which are determined by the National Bureau of Economic Research (NBER).

Here is a close-up of GDP alone with a line to illustrate the 3.3 average (arithmetic mean) for the quarterly series since the 1947. I’ve also plotted the 10-year moving average, currently at 1.7. It’s certainly good to see the Q3 GDP Advance Estimate above that moving average.

Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe. The latest GDP number is slightly above the approximate 2.1 of the regression at the same position on the horizontal axis.

And for a bit of political trivia in this post-election period, here is a look a GDP by party in control of the White House and Congress.

In summary, the Q3 GDP Advance Estimate of 2.5 is still below the long-term 3.3 GDP average, but it is an encouraging continuation of the growth trend in 2011: From 0.4 in Q1 to 1.3 in Q2, and now an early read of 2.5 for Q3.

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