Third Quarter GDP Revised Downward

On November 25, the Bureau of Economic Analysis (BEA), a division of the U.S. Department of Commerce, announced that real gross domestic product (GDP), which is the total of output of goods and services produced by labor and property located in the United State, declined at an annual rate of .5 percent in the third quarter of 2008.  The decline in GDP was worse than the BEA had initially predicted.  In the advance estimates, the decline in GDP was reported as .3 percent.

According to the BEA, among the biggest contributors to the decline in GDP were negative contributions from consumer spending and declines in exports and state and local government spending.  Offsetting those decreases was federal government spending.

Real personal consumption spending decreased 3.7 percent in the third quarter, in contrast to a 1.2 increase in the second quarter.  However, second quarter spending was likely bolstered by the economic stimulus tax rebates.  Those rebates having been spent or saved, and with the economy in decline over falling housing prices, forcing labor cuts, it is no wonder that consumer spending is fast disappearing.  In fact, it seems that the only thing holding up the U.S. economy is federal government spending.  According to the BEA, real federal government consumption expenditures and gross investment rose 13.6 percent in the third quarter, a sharp increase from the previous rise of 6.6 percent in the second quarter.