Survey of Current Business
January 2020
Volume 100, Number 1

GDP and the Economy

Third Estimates for the Third Quarter of 2019

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Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2019, according to the third estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 With the third estimate, real GDP growth for the third quarter was the same as in the second estimate issued last month (see “Updates”). In the second quarter of 2019, real GDP increased 2.0 percent.

The increase in real GDP in the third quarter reflected positive contributions from consumer spending, federal government spending, residential investment, exports, and state and local government spending that were partly offset by a negative contribution from nonresidential fixed investment and private inventory investment.2 Imports, which are a subtraction in the calculation of GDP, increased (chart 2 and table 1).

The acceleration in real GDP in the third quarter reflected a smaller decrease in private inventory investment and upturns in exports and residential fixed investment (table 1). These movements were partly offset by decelerations in consumer spending, federal government spending, and state and local government spending and a larger decrease in nonresidential fixed investment.

  • The smaller decrease in private inventory investment primarily reflected upturns in the retail trade and nondurable-goods manufacturing industries.
  • The upturn in exports reflected an upturn in exports of goods, led by a smaller decrease in nonautomotive capital goods and an upturn in automotive vehicles, engines, and parts.
  • The upturn in residential fixed investment reflected an upturn in structures, led by an upturn in improvements.
  • The deceleration in consumer spending reflected decelerations in spending on both goods and services. The deceleration in spending on goods was led by a deceleration in motor vehicles and a downturn in clothing and footwear. The deceleration in spending on services primarily reflected slowdowns in spending on health care and recreation services.
  • The deceleration in federal government spending primarily reflected a deceleration in nondefense spending. Second-quarter spending was boosted when the federal government returned to normal operations after the partial government shutdown that occurred in the fourth quarter of 2018 and the first quarter of 2019. For more information, see “How will the federal government shutdown be reflected in GDP for the fourth quarter of 2018 and the first quarter of 2019?
  • The deceleration in state and local spending mainly reflected a downturn in gross investment in structures.
  • The larger decrease in nonresidential fixed investment primarily reflected a downturn in spending on equipment, which was more than accounted for by a downturn in computers and peripheral equipment. The downturn in equipment was partly offset by an acceleration in spending on intellectual property products.

Real gross domestic income increased 2.1 percent in the third quarter after increasing 0.9 percent in the second quarter.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 1.4 percent in the third quarter after increasing 2.2 percent in the second quarter (chart 3 and table 2). The deceleration primarily reflected a downturn in the prices for consumer goods; the main contributor was a downturn in prices for gasoline and other energy goods.

Food prices turned down, decreasing 0.7 percent in the third quarter after increasing 0.7 percent in the second quarter. Energy goods and services decreased 8.0 percent after increasing 18.8 percent. Gross domestic purchases prices excluding food and energy increased 1.8 percent, the same rate as in the second quarter.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, accelerated, increasing 2.1 percent in the third quarter after increasing 1.9 percent in the second quarter.

Real GDP increased 2.1 percent in the third quarter of 2019, the same increase as in the second estimate (table 3, line 1). Upward revisions to consumer spending and nonresidential fixed investment were offset by a downward revision to private inventory investment.

  • The upward revision to consumer spending reflected an upward revision to spending on services that was partly offset by a downward revision to spending on goods.
    • Within services, the largest contributors to the upward revision were “other services” (notably personal care) and financial services (notably portfolio management and investment advice).
    • Within goods, the largest contributor to the downward revision was food and beverages.
  • The upward revision to nonresidential fixed investment was more than accounted for by the revision to investment in structures, notably power and communications structures.
  • The largest contributor to the downward revision to private inventory investment was wholesale trade industries, notably nondurable goods.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation (IVA) adjustment and the capital consumption adjustment) decreased $4.7 billion, or 0.2 percent at a quarterly rate, in the third quarter of 2019 after increasing $75.8 billion, or 3.8 percent, in the second quarter (table 4). Profits of domestic financial corporations decreased $4.7 billion, profits of domestic nonfinancial corporations decreased $5.5 billion, and rest-of-the-world profits increased $5.5 billion.

Profits after tax increased $11.1 billion in the third quarter after increasing $66.1 billion in the second quarter (line 10).

 

Industry profits (corporate profits by industry with IVA) decreased $6.7 billion, or 0.3 percent at a quarterly rate, in the third quarter of 2019 after increasing $80.6 billion, or 4.0 percent, in the second quarter (table 5 and chart 4).

 

 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2018 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”