Revised Q3 GDP Growth at 3.6%, Tough Q4 Expected

December 5, 2013

WASHINGTON (12/6/13)--Third quarter Gross Domestic Product (GDP) growth was revised upwards Thursday by the U.S. Commerce Department to a seasonally adjusted annualized rate of 3.6%.

The estimated advance reading, 2.8%, was changed after the department's Bureau of Economic Analysis received a more complete dataset. The new numbers revealed strong growth in inventory investment that contributed 1.7% to overall growth, making up the entire revision.

Overall economic growth last quarter was also boosted by a deceleration of imports, and a faster pace of state and local public spending.

Third-quarter inflation rose by 2%. Core inflation--subtracting fuel and food--increased by 1.5%.

The sharp rise in inventory growth, however, casts a shadow over the fourth quarter, according to Moody's ( Dec. 5). Bolstering anxiety is the fact that real final sales of domestic product--GPD growth which doesn't account for inventory investment--fell to. 1.6% from 1.7% on an annual basis, the weakest reading in three years. The measure's growth contracted to 1.9%, from 2.1% on a quarterly basis.

Gross domestic income growth also fell to 1.4%, a year-low, and corporate profits grew by just 1.8%--down from 3.3% in the second quarter.

The effect of October's partial government shutdown will also be felt in the fourth quarter. It is expected to shave a half percentage point off GDP growth.

Another round of budget and debt-ceiling negotiations coming in the new year could shock consumer confidence and bring a new round of austerity measures, which were at their most intense this year since the end of World War II ( Dec. 5).

Moody's analysts did say that expectations for increased consumer spending and residential investment should see GDP growth accelerate gradually next year, despite the current inventory glut.