Third quarter GDP keeps shrinking. Fourth quarter another matter

  • Share
  • Read Later

The Bureau of Economic Analysis has just released its third try at estimating third-quarter GDP. It’s now been ratcheted down to 2.2%—from 2.8% in the estimate released a month ago and 3.5% in the original estimate. The culprit:

downward revisions to nonresidential fixed investment, to private inventory investment, and to personal consumption expenditures.

It just goes to show you can’t believe what you read in a GDP release. In fact, even the “third estimate” of third quarter GDP (the BEA used to call it the “final” estimate until they realized that was silly) will continue to be revised in the years to come.

None of this is stopping economists from speculating about fourth-quarter GDP. As I wrote a couple weeks ago, lots of forecasters have been revising their estimates of fourth-quarter growth northwards of 4%. On Jan. 30 the first BEA estimate will come out—after which, of course, the government’s statisticians will start revising it downwards or upwards.

What’s the takeaway here? We’re in an economic recovery, but we still don’t know how strong it is or how sustained it will be. Which you surely could have told me before today’s GDP release.