Everything You Need to Know About Today's GDP Report

Today I want to talk about what may be the most important three-letter acronym when it comes to the U.S. economic recovery: GDP, which stands for Gross Domestic Product.

GDP is the broadest measure of a nation’s economic activity—adding up the total value of all goods and services produced in the U.S. This influential status update on the U.S. economy takes into account net exports, government spending, consumption, investment and inventory. Of course, out of these, the most important component is consumption, which accounts for about two-thirds of GDP.

The latest report is the third estimate for third-quarter GDP—which measures the U.S. economy’s progress over the third quarter. Because this is such an important report, the Commerce Department officially revises each quarter’s GDP estimates a total of four times: three times during the quarter (advance, preliminary and final), as well as a final time once a year in July when the annual benchmark revisions are announced.

And what had the newswires buzzing this morning is that the U.S. economy grew at an annual rate of 3.5% in the third quarter. This was above the previous estimate of 3.2% annual growth, and well above the 1.4% growth logged in the second quarter.

Notably, this is the fastest the economy has grown since Q3 2014. The good news is that consumer spending was a little stronger than previously estimated, rising 3.0% compared with the original estimate of 2.8%. However, this represents a slowdown from the 4.0% jump in consumer spending during the second quarter.

Meanwhile, nonresidential construction spending soared 12.0%, the largest jump since Q1 2014. The U.S. economy also benefited from a surge in soybean exports, so overall exports grew 10.0% in the third quarter.

There were also indications that the U.S. economy won’t be able to keep up this pace. Corporate profits were revised lower to reflect a 2.6% gain, down from the previous estimate of 3.5%. Corporate spending on equipment was also revised down to 4.5% growth, compared with the prior estimate of 4.8%.

As a result, economists expect that the U.S. economy will grow at a more modest 2.2% pace in the fourth quarter. In any event, we’ll know more when the Commerce Department releases its preliminary estimate for Q4 in January. In the meantime, I’ll continue to brief you on the latest economic news through this daily blog.

Sincerely,

Louis Navellier

Louis Navellier

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