U.S. economic growth was revised up one tenth of a percentage point to 2.1% annualized in the third quarter.
Consumer spending growth was also upgraded one tenth to 1.7% (versus 1.6% in advance release), driven by a smaller drop in durables spending than initially reported (-24.4% vs. -26.2% adv.). This was partially offset by a downward revision to services spending (+7.6% vs. +7.9% adv.).
Headline growth in business investment was revised down slightly, to 1.5% (from 1.8%). A downward revision to intellectual property products was offset by upward revisions to spending on equipment and structures.
Revisions for residential investment, government spending and imports and exports were similarly negligible. The contribution to growth from inventory building was revised one tenth higher to 2.1 percentage points.
Corporate profits are reported with the second estimate and showed profits up $ 121.4 billion (or 18.4% annualized), downshifting from a $267.8 billion in the second quarter. Corporate profits continue to gain ground as share of GDP, now at 12.7%, the highest share in over 60 years.
Key Implications
The story of the economy in the second quarter remained the same. Growth slowed, largely driven by consumer spending cooling from its blistering stimulus-driven pace in the first half of the year, worsened by shortages of autos. Services spending growth was still healthy, with some evidence the pace was muted a bit by the Delta wave of infections.
We continue to expect growth to pop higher in the fourth quarter, at a better-than 4% pace. A more precise estimate will come after we comb through October’s consumer spending data released later this morning. Stay tuned.
