Gov: Q3 US GDP Grew at 2.5%

Last quarter, US GDP grew 2.5%, thanks to consumers spending more on goods and services; companies building up inventory; companies buying factories, equipment, software, and other space (M&A activity?); less imports, and higher federal government spending. The government’s estimate of 2% GDP growth last month was based on incomplete data, according to the report:

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 2.5 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the “second” 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, exports, and federal government spending that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the third quarter primarily reflected a sharp deceleration in
imports 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.

Calculated Risk puts our 2.5% growth in context with the chart below:

“The dashed line is the median growth rate of 3.05%. The current recovery is still below trend growth,” they write. So while growth is good, all GDP growth is not created equal. We still have a ways to go.