The real gross domestic product grew at a revised 2.9% annualized rate in third quarter, compared to a 0.6% rate of decline for the second quarter and an -1.6 pace for the first quarter (see the first chart). Real gross domestic product has increased by 1.9 percent over the last four quarters.
The real final sales to domestic private purchasers, which accounts for approximately 88 percent real GDP, is a key indicator of private domestic demand. Growth has remained positive in spite of declines in real GDP. Growth has been slowing, with growth dropping from 2.6 percent in quarter four to 2.1 percent, 0.5 percentage in the second quarter and revised 0.5 percent for the third quarter (see the first chart). The real final sales to domestic private purchasers have increased by 1.4 percent over the past four quarters.
Headline numbers like GDP don’t provide a complete picture. The third quarter saw mixed performance across all components of GDP, despite a strong result in real GDP growth. Real consumer spending rose at an annualized rate of 1.7 percent and contributed 1.18 percentage points towards real GDP growth. Consumer spending has contributed an average 2.0 percentage point to real GDP growth over the past 40 years. This is a 3.0 percent annualized rate. Consumer services led overall consumer spending growth, with a 2.7% annualized rate. This added 1.22 percentage points of total growth. Durable goods spending declined at a 0.3% pace, which is the second consecutive decline. This was 0.03 percentage point less than nondurable goods spending, which fell at 0.01 percent, the third consecutive fall. (See third and fourth charts).
In the third quarter 2022, business fixed investment increased by a revised 5.1% annualized rate. This added 0.66 percentage points of final growth. Intellectual-property investment rose at a 6.9 percent pace, adding 0.31 points to growth, while business equipment investment rose at a 10.7 percent pace, adding 0.53 percentage points. Spending on business structures declined at 6.9%, which is the sixth consecutive decline, and subtracts 0.18 percentage points of final growth (see the second and third charts).
After a 17.8 percent annualized drop in residential investment (or housing), the third quarter saw a plunge of 26.8 per cent. The third quarter’s drop was the sixth consecutive one and subtracted 1.40 percent from third quarter growth (see the second and third charts).
In real terms, inventory was added at $49.6 billion per year in the third quarter, compared to $110.2 billion in second quarter accumulation. Third-quarter growth was 0.97 percentage points slower due to slower accumulation (see third chart). This was in addition to a substantial 1.91 reduction from second quarter real GDP, which more than made up the 0.6% decline in the headline result. The headline real GDP growth is often affected by swings in inventory accumulation.
The pace of export growth was revised to 15.3 percent, and imports decreased at a revised 7.3% rate. Imports are a negative factor in gross domestic product calculation. A drop in imports can be a positive for GDP growth. This was 1.21 percentage point more in the third quarter. See second and third charts for 1.72 percentage point increases in exports. Net trade (as used in the calculation for gross domestic product) contributed 2.93 percentage points towards overall growth. This helps to conceal the weakness in domestic consumption.
The third quarter saw government spending rise at 3.0 percent annually, compared with a decline of 1.6 percent in the second quarter. This was 0.53 percentage point more growth.