Final Third Quarter GDP

America’s third-quarter GDP rose 1.8%, which was below consensus expectation, according to the Commerce Department’s final revision.  The drop was due to changes in the mix of components which comprise GDP and present a somewhat strange picture.  For instance, part of the decline was a drop in personal consumption.   We would normally agree any drop in sales is unfortunate but in this case the decline was registered by less spent on hospital services.  That’s statistics for you; seeing fewer people getting sick is apparently bad for the economy!

Our nation’s gross domestic product (GDP) is reported on a quarterly basis three different times.  Every month following the end of a calendar quarter, as more information comes available, a new guesstimate is published.  This report represents the final revision to the third quarter which in the preliminary report was initially seen as fairly upbeat, rising at a 2.5% rate.  The revised version which came out a month later pared that down substantially to show a 2.0% rise.  This final revision adds to that disappointment despite the odd way in which it was derived.

Year-over-year our economy has advanced just 1.5%, an amount which will do little to offset the stagnant state of affairs in which we currently find ourselves.  This report also pegs inflation at 2.6% which is worrisome.  It’s not good to see prices moving up faster than production.  With some of our indicators currently showing an improving picture in employment and housing, we would hope retail sales will keep pace.  Unfortunately, with wages adjusted for inflation actually declining of late that could be hard to accomplish.  All of this will surely result in lowered expectations for the fourth quarter GDP report which we will see toward the end of January.