GDP growth driven by private inventories

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Dec. 6, 2013 – The U.S. economy expanded 3.6 percent in the third quarter, according to the government second estimate of gross domestic product, primarily due to an upsurge in private inventories, said NAFCU Chief Economist and Director of Research David Carrier.

“The big increase in third-quarter GDP was due primarily to an increase in inventories, which accumulated at the fastest rate since 1998,” Carrier said in a NAFCU Macro Data Flash report. He noted the increase in unsold goods added 1.68 percentage points to GDP last quarter; it was the largest contribution to overall GDP growth since the fourth quarter of 2011. Total government expenditures also made a positive contribution to GDP growth for the first time this year, Carrier said, even though Federal government expenditures continued to decline.

Data from the Bureau of Economic Analysis also showed:
  • residential investment increased 13 percent;
  • nonresidential investment increased 3.5 percent;
  • consumer spending increased by 1.4 percent; and
  • government spending increased by 0.4 percent. 
“Residential investment also continued to make significant gains, while nonresidential investment improved at a slower pace,” Carrier said. “The ongoing recovery in the housing market and slow improvements in the labor market are contributing to GDP growth. The ongoing drag from declining government expenditures paused in the second and third quarters, which helped boost overall GDP.”

Changes in inventories grew from $56.6 billion in the second quarter to $116.5 billion in the third quarter. Net exports changed from negative $424.4 billion to negative $422.1 billion from the second quarter to the third.

“The impact of the October government shutdown will be captured in fourth quarter data and is expected to affect growth in the final quarter of the year,” Carrier said.

Related Links:
NAFCU Macro Data Flash report