I just got back to the office, and wanted to take a quick look at GDP data, which seems to be dominated by inventory build:

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.0 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

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

The small acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in
and accelerations in private inventory investment and in PCE that were partly offset by a
downturn in residential fixed investment and decelerations in nonresidential fixed investment and in exports.

Here are the breakdowns:

• The change in real private inventories added 1.44% percentage points to the third-quarter change in real GDP after adding 0.82% percentage point to the second-quarter change.

• Private businesses increased inventories $115.5 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first.

• Real final sales of domestic product — GDP less change in private inventories — increased 0.6% in Q3 compared with an increase of 0.9 % in Q2.

• Motor vehicle output added 0.42% to Q3 (after subtracting 0.06% in Q2);
• The price index for gross domestic purchases (prices paid by U.S. residents) increased 0.8% in Q3;
• Excluding food and energy prices, the price index for gross domestic purchases increased 0.6% Q3, compared with an +0.8% in Q2;
• Real personal consumption expenditures increased 2.6% versus 2.2% in Q2;
•Durable goods increased 6.1% vs 6.8% Q2.
•Nondurable goods increased 1.3% vs 1.9%; Services gained 2.5% vs 1.6%
• Real nonresidential fixed investment increased 9.7%vs 17.2%
• Nonresidential structures increased 3.9% percent vs 0.5%
• Equipment and software increased 12% vs 24.8% in Q2
• Real residential fixed investment decreased 29.1% (vs an increase of 25.7% in Q2).
• Real exports of goods and services increased 5.0% Q3 (vs 9.1%)
• Real imports of goods and services increased 17.4 percent,
compared with an increase of 33.5 percent.
• Real federal government consumption expenditures and gross investment increased 8.8% Q3 vs 9.1%; National defense increased 8.5% vs +7.4%; Nondefense increased 9.6% vs 12.8%


Annualized GDP

Chart via Calculated Risk


National Income and Product Accounts
Gross Domestic Product, 3rd quarter 2010 (advance estimate)
BEA, 8:30 A.M. EDT, FRIDAY, OCTOBER 29, 2010


Category: Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

24 Responses to “GDP = 2%”

  1. rktbrkr says:

    On Oct. 29, 1929, stock prices collapsed on the New York Stock Exchange amid panic selling. Thousands of investors were wiped out.

    Lets wait until we get the final number for the Q, 2% seems a little high, things are ramping up from last Q?

  2. So…

    1. A large component of GDP was inventory build (so there will be a future slowdown)

    2. Imports are a large component of GDP (which subtracts from GDP)

    3. Imports (oil, materials) are increasing in price

    4. How is QEII going to help, if it just results in more US dollars chasing imports? Will this not just reduce American purchasing power

    Result = stagflation?

    Even Bill Gross is complaining about QEII….


  3. machinehead says:

    Year-over-year, nominal GDP increased by a weak 4.4%, while real GDP was up 3.1% from the third quarter of last year.

    That is, if you believe the extremely mild level of the GDP deflator. While I wouldn’t go as far as Shadowstats’ claim of inflation raging at 8%, I’ll stipulate that the MTA is raising NYC bridge and tunnel tolls more than 5% as 2011 begins; our food expenditures in the grocery story are way up; and gasoline is rising as BR noted yesterday. So I do not remotely believe that Personal Consumption Expenditures are rising at a miniscule 0.8% rate.

    Take 4.4% nominal GDP growth, subtract your own homebrew estimate of inflation, and what you get is real-world GDP growth. My estimate is in the zero to one percent range — meaning a stagnant economy, dead in the water.

    As in the former Soviet Union, it is now government policy to exaggerate economic statistics for ‘national security’ reasons. Who are you gonna believe — the US fedgov, or your lying eyes?

  4. Mannwich says:

    There’s that “excluding food & energy” again. How convenient. So utterly absurd.

  5. Mannwich says:

    @Alaric: I don’t want to put words in BR’s mouth, but I believe he’s drawn several comparisons to the ’70′s, which don’t seem apt yet, but if we get more QE and not much else, then stagflation my just be where we’re headed, which means BR could well end up being right.

  6. Mannwich says:

    From what I can tell here, food & energy prices where I live are both up quite a bit. How convenient for the Fed and Feds to be able to exclude that data point. It’s not as if we don’t need either to live or run our economy or anything.

  7. Hi Mannwhich – I agree completely re. stagflation in the short / medium term….

    Frankly I am worried about the medium to long term, and believe US soverign risk is underappreciated…..

    If interest rate markets are not allowed to work and signal government excesses, and if, as machinehead points out above, inflation is understated (which I believe is true), then how is the US different from say Argentina?

    Perhaps the difference from Argentina is one of scope (ie, the US is a lot BIGGER, hence more of a looming problem !)

    This would argue for investing outside the US and certainly not in fixed income !

  8. Mannwich says:

    @Alaric: Well, one difference is ours being the reserve currency. Another is a whole shitload of nukes.

  9. ashpelham2 says:

    Short term is the only thing we can even remotely predict, and it sure looks like stagflation to me. Little to no job growth, little to no wage growth, little to no price increases, except in the “must-haves”, food and energy. These are the only growth markets right now. Stagflation might be better than crippling inflation, or depressionary deflation. So, we just putter along.

    I don’t know how anyone can worry beyond 8-10 years out. There are simply too many moving parts to worry about sovereign risk of Uncle Sam. IMO, sovereign risk is already so high in the PIIGS, and could grow into Asis if China’s bubble ever pops, that US risk will still seem like the safest bet. Nowhere else on earth would seem as stable. Perhaps some people on Mars could issue some t-bills so I can add those to Hi-Quality?

    Mannwich is right: the two things we MUST have is food and energy. There is a stranglehold on those prices, and stagnant wages. That is the biggest concern my household has. I imagine we are a lot like other folks. 4.00 gasoline in the southeast again will be crippling.

  10. VennData says:

    America is strong.

    If people are so concerned about the economy, why aren’t they buying locally? Buy movies, pizza delivery and craft beers. Pass on the foreign cars, foreign oil, and foreign-drilled gold.

  11. Mannwich says:

    @ash: Maybe we all just need to eat less and turn the thermostat down, and drive less? There, problem solved. Might even solve the obesity problem. Well, maybe not. ;-)

  12. Mannwich says:

    @Venn: I DO buy locally all the time, including our local food co-op (mostly local produce and meat), which is very good but also VERY expensive. Can’t speak for others though.

    But we also have a decent income. What happens if/when that ends? Hard to expect the unemployed to “buy local” under those conditions.

  13. Mannwich – the reserve currency helps, but ensures that the problem will not be solved in the short term and that when it is ‘solved’ the adjustments will probably be bigger than if the USD was not the reserve currency

    Let us recall also that the Russians had lots of nukes too…..but you could argue that they are now a regional as opposed to global power now….

    The real problem here to me is the uncertainty created by all of this, particularly so with regard to the QEII (ie, money printing).

    The Fed is looking for opinions among government bond dealers and “investors” for what appears to be the first time ! This does not appear to be the actions of a confident central bank…..

    Perhaps they are only interested in how much Treasury debt they can push out at super-cheap interest rates?


  14. rootless says:

    Why even talk about this number, if it is likely not true anymore after the next revision? The difference from the advanced estimate of the GDP change to its last estimate is rather large on average. Not just the first and second revision, but even the annual revisions often change the numbers a lot.

    That’s what has been so annoying about the reporting in the mainstream media like AP or Bloomberg today again. These ink jerks present this number as if it was a fact and then the spin starts based on it.

    @VennData, Mannwich:

    I don’t by consciously locally. Why should I? Why should I care? For patriotic reasons? Wrong address. I buy according to my individual economic interests. If the imported product is cheaper, and even better, which is often the case, then this is the one I buy.

  15. HarryWanger says:


    Most people aren’t concerned about the economy. The ARE however concerned about:

    -World Series
    -Dancing with the Stars
    -Any reality tv show with some hot babe/ex-celeb/fat people losing weight, etc.

    But the economy?? If it’s on sale at Walmart, they’re buying it regardless of where it comes from.

  16. Mannwich says:

    LOL Wanger. Sad but true.

  17. ashpelham2 says:

    This also explains why Apple’s stock has soared through the roof during a time when other retail stocks have dragged.

  18. Mannwich says:

    Exactly ash. Apple and other supposed “discretionary” items have ceased to be “discretionary”. They are now a must-have for all classes.

  19. powerpenguin says:

    If it’s OK, I would love people’s opinions about this;
    these are people I trust: http://www.consumerindexes.com/
    looking at the first graph on the page there, they are in wild disagreement with the GDP that is being quoted recently in the news. And, if you look at that same first graph, whatever method they used to calculate the GDP in advance was once in pretty good agreement with the official one, but then you see at about the same time the recession started they start to diverge, and seem to just get more and more different.
    Any ideas as to what is causing this? What are they looking at that the official numbers don’t, or the other way around, that is leading to such disagreement?

  20. powerpenguin —- all you need is a different inflation deflator and you calculate different GDP…

    ISM is coming out Monday – it will be interesting to see what it shows….

  21. rootless says:


    You are somewhat mistaken. Consumer Metrics Institute (CMI) doesn’t measure or calculate the GDP change. CMI only track a subset of data that contribute to the GDP: online purchases of discretionary consumer goods. In addition to non-online purchases of discretionary consumer goods, GDP has more components not included in the CMI-data at all like non-discretionary consumer goods, business spendings, government spendings, exports, imports. So one shouldn’t expect that both are the same.

    Nevertheless, even some of the discretionary consumer components of the GDP-change as estimated by the government has seemed to increasingly diverge from the CMI data this year. I think there could be different reasons for that:

    1. The sampling method applied by the government could be highly biased. A bias toward large retail companies in the sample or surviver bias. A part of the data aren’t sampled at all. They are imputed instead.
    2. The seasonal adjustment applied by the government statisticians could screw up the data. For instance, the second half of the year 2008 showed a very strong economic downturn. It would be worth to check whether this downturn creates a false seasonality in the following years. One could hypothesize that such a false seasonality might produce an upward bias in the same year part of following years.
    3. The CMI data could be biased. A hypothesis could be that consumer behavior changed. Perhaps consumers shifted purchases from online to non-online w/o a change in the total purchase amount. That would create a false signal in the CMI-data.
    4. There is a time lag between the CMI data and the reported GDP, which can be several months. CMI tracks the consumer demand quasi real-time, whereas it takes time before changes in the demand are reported by retailers to the government, and it takes even more time before producers react to changes in the demand by changes in the output. It could be that the decrease in the demand tracked by CMI won’t show up as change in the GDP, or in its discretionary components, before the 4th quarter of 2010.

    Anyway, since the advanced estimate of the GDP change reported by the BEA is often heavily revised, I recommend to wait and see what will be left of today’s data after the revisions. Perhaps we will have to wait until the annual revision next year.

  22. rootless says:


    I don’t care about anything of what you mentioned. Some Internet porn is fully sufficient.

    If it’s on sale at Walmart, they’re buying it regardless of where it comes from.

    And why shouldn’t they? Much of the stuff “Made in USA” is just plain crap anyway, low quality. Why should anyone buy this? I also prefer a Lexus or a BMW over any similar car made in US. Why should it be different with small stuff?

  23. onphylem says:

    I would submit that, besides food and energy, other “must haves” include education, health care, and of course ,ever-increasing Defense Department spending, aka, military keynesianismm. Who will be removed from the circle of benficiaries?



    BR: military keynesianism? WTF is that ?

  24. onphylem says:


    Sorry for the cryptic reference

    The Oxford Essential Dictionary of the U.S. Military | 2001 | defines
    “military Keynesianism” as a version of the macroeconomic theories of the economist John Maynard Keynes which holds that military spending by the so-called military-industrial complex is one means of using fiscal policy to manage the national economy.

    I take it to mean that, putatively, by producing more guns, we can realize even more butter. My question is this.
    What are the opportunity costs of such a policy? Who will voluntarily accept less?