GDP, or Gross Domestic Product, is updated each month by the Bureau of Economic Analysis (BEA). It describes how fast the economy grew in the last quarter. The ideal growth rate is between 2-3%. This is fast enough to provide enough jobs but not so fast it will create inflation
Each quarterly report gets three releases:
- Advance Estimate: Comes out one month after the quarter ends. This can often be wildly different from the final report, simply because all of the trade and business inventory data is not in yet.
- Second Estimate: Comes out two months after the end of the quarter. This is usually pretty realistic. Formerly called the Preliminary Estimate.
- Third Estimate: Comes out three months after the end of the quarter. Usually only tweaks the Second Estimate. Formerly known as Final Estimate.
To understand the government's GDP reports as they are released, it's helpful to see how much they change each month. Here is an archive of blog posts for each release from the fourth quarter of 2006 to the fourth quarter 2013. Please note that the BEA also made these subsequent revisions:
- July 31, 2013 - The BEA revised all figures since 1929 based on improved estimates of intellectual property values and pensions.
- July 27, 2012 - All figures since Q1 2009.
- July 29, 2011 - All figures since Q1 2006.
- May 25, 2010 - All figures since 1929.
- July 31, 2009 - All figures since 1929.
The most recent figures are given first. Any prior estimates follow in parentheses with the year they were revised. Sorry it's a little confusing, but it's important to see how the data is changed. These changes aren't easily available anywhere else.
- Advance - Scary-low growth of only .1%. Exports dropped 12%, while business spending fell 6.1%. Most analysts blamed it on severe winter storms.
- Second - The economy actually contracted 1.0%, thanks to a massive downward revision in inventory. That partly makes sense, since stores bought too much inventory for what turned out to be a poor holiday season. However, business investment was down a whopping 11.7%, driven by a 7.5% downturn in commercial real estate, a 5% decline in housing, and a 3.1% drop in equipment. Exports fell 6%, the biggest decline in at least 4 years. The only good news is that personal consumption of services rose 4.3%. Is it the start of a recession (two quarters of economic contraction)? Probably not, but stay tuned.
- Third - More data revealed what many had feared -- GDP fell by a whopping 2.9%, the biggest pull-back in five years. Another contraction like this and we are in a recession. Consumer spending grew just 1%, while residential real estate investment fell 4.2%. Businesses drew down excess inventories, which subtracted 1.7% from growth.
Q1: 1.1% (1.8% in 2012 estimate)
- Advance - Housing contributed to 2.5% growth. The three major pistons of the economic engine are contributing. First and foremost, housing construction is solidly expanding in response to rising housing prices and demand, something we haven't seen in seven years. Second, consumer spending is still showing confidence. Third is manufacturing, especially from agri-business, as farmers replenished their silos after last year's drought.. These three private sector engines overcame the drag from decreased government spending.
- Second - Estimate revised down only slightly to 2.4%.
- Third - The BEA lowered its estimate to a measly 1.8%. Why such a dramatic drop? Additional data about consumer spending showed it was much lower than it originally thought. This makes sense, because cold weather in March dampened retail sales. For more, see Current Retail Sales Statistics.
- Advance - Exports and housing drove 1.7% growth.
- Second - Better export data revised growth up to 2.5%.
- Third - Estimate remains at 2.5%. Growth was driven by exports and residential construction, and occurred despite everything that Washington threw at it (sequestration and tax hikes).
- Advance - 2.8% growth was because businesses stocked up on inventory. Consumer spending only increased 1.5%, the lowest in five years. This makes up 70% of the economy, and represents what families are willing to spend on everyday goods and services. This low rate of growth shows that most people aren't willing to spend a lot. This is confirmed by the slowdown in Halloween sales, and projected softness for the Black Friday holiday shopping season. Most of the growth was from durable goods, like automobiles, furniture and appliances. People were taking advantage of low interest rate loans before rates rose further. Government spending rose only .2%, driven mostly by state and local governments. Sequestration slowed federal spending by 1.7%. While some of the cutbacks were in defense, down .7%, most was in non-defense, which fell 3.3%. This all happened before the government shutdown. Exports rose 4.5%, while imports rose just 1.9%.
- Second - The 3.6% growth rate was driven primarily by stores stocking up for the holiday shopping season, adding $16.5 billion, more than in the entire first half of the year. New home construction rose 14.6%., while commercial construction (mostly apartment buildings) increased 12.3%. Business spending on other equipment was actually down 3.7%, signaling low confidence.
- Final - The 4.1% growth rate won't last. The boost was from stores stocking up on inventory for a retail season that disappointed. Consumer spending was sluggish, thanks to poor job growth.
- Advance - Healthy growth of 3.1% despite government shutdown. Most of the consumer spending was for automobiles, washing machines and other big-ticket items financed by low-interest rate loans. Spending on these durable goods increased an astounding 5.9% in the fourth quarter. The stock market rose on the positive growth news, especially since the shutdown subtracted .3% growth in October. Another huge drag on growth was housing construction, which was down a whopping 9.8%.
- Second - Growth revised down to 2.4%. Personal consumption grew just 2.6%, instead of the first estimate of 3.3%. This is in keeping with the disappointing retail sales. Most of the decrease was from revised estimates for automobiles, washing machines and other big-ticket items financed by low-interest rate loans. Spending on these durable goods only rose 2.5%, instead of the initial estimate of 5.9% in growth. Housing construction still showed a 8.7% decline.
- Third - Revised up to 2.6% thanks to more complete data, which revealed that personal consumption rose 3.3%, (higher than last month's estimate of 2.6%. Construction remains a drag on growth. Housing construction was down 7.9%, while commercial construction fell 1.8%. That's not just because of cold weather -- last year at this time, homebuilding was up 19.8%, while commercial construction rose 17.6%.
More GDP by Year
For earlier years, see U.S. GDP History