Two months the media and Obama Administration were trumpeting the announcement that third quarter GDP had grown at an annualized rate of 3.5%. Unfortunately, their celebrations were a bit premature the Commerce Department today announced their final estimate of third quarter GDP… Not surprisingly third quarter GDP was a lot lower than they originally estimated:
Third-quarter GDP was originally estimated two months ago at a 3.5% annualized rate but was revised down to 2.8% growth in last month’s estimate. The revisions come from more complete data than was available at the first and second estimates.
The 2.2% revised growth rate is the strongest since the third quarter of 2007, just before the recession began.
Still, economists surveyed by MarketWatch had been expecting only a minor revision to 2.7% in the third estimate. See our complete economic calendar.
Economists are forecasting stronger growth — about 4% on an annualized basis — in the fourth quarter ending Dec. 31. They also see annualized growth of about 3% in the first half of 2010.
The revisions to third-quarter GDP were in three major areas: Business investment, consumer spending, and inventories.
Final sales increased at a 1.5% annual pace, revised from 2.5%. Gross domestic purchases — sales to U.S. residents — rose at a 3% annual rate, revised down from 4%.
The revisions shouldn’t surprise anyone, as Ed Morrissey notes the first-time home buyer tax credit and the Cash for Clunkers program accounted for roughly half of the original estimate of 3.5%. Assuming they still account for 1.5% of the final estimate that leaves a rather anemic 0.7% growth in the third quarter… That’s not a recovery, that’s life support!
James Pethokoukis has more on the political implications here.