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Kimberly Amadeo

Q3 GDP Revised Up to 2.7%

By December 1, 2012

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The Bureau of Economic Analysis revised its estimate of economic growth for the third quarter (July - September) from 2% to a much healthier 2.7%. This was the fastest growth for the year, beating the 2% rate in the first quarter (January-March),  and the 1.3% rate for the second quarter (April-June). Why did GDP growth pick up?

The BEA revised estimates based on additional data from businesses. For example, exports of goods came in stronger than reported for the advance estimate given last month. Instead of detracting .35% from GDP, exports actually contributed .03%. The other improvement was a bigger increase to private inventories, which contributed .77% to GDP. (Source: BEA, GDP Second Estimate, November 29, 2012)

This improvements were added to last month's strong drivers of growth: durable goods, consumables (especially clothing and footwear) and government spending, (especially for defense.)

What It Means to You

If growth stays at this level, it will be at a healthy range. That means it's fast enough to avoid falling into a recession, but slow enough that it doesn't trigger inflation. However, growth needs to be at 3-4% or even 5% for a quarter or two to put a significant dent in unemployment.

Until the economy is growing at that brisk rate, no one in Washington should be talking about cutting spending OR increasing taxes. Yes, they should lower the debt, but not until the economy is fully recovered and there are plenty of jobs for people. The debate over how to reduce the debt is foolish because it is poorly timed. Instead, our elected officials should focus on what affects YOUR life now -- increasing jobs and restoring the housing market. The self-imposed fiscal cliff crisis is doing anything but that.

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