Revised US 3rd Quarter GDP Lowered due to Increased Government Spending Adjustment

The U.S. economy’s growth in the third quarter was lower than anticipated as the Bureau of Economic Analysis (BEA) revised the GDP data downward due to a significant decrease in personal consumption. According to the latest report, the GDP expanded by 4.9 percent in the three months ending on Sept. 30, which is a decline from the BEA’s second estimate of 5.2 percent. This matches the advance estimate made in October.

The downward revisions to consumer spending, exports, and inventory investment led to the lower adjustment in the final GDP figure. However, these decreases were partly offset by upward revisions to business and housing investment, as well as federal, state, and local government spending.

In the final GDP report, personal consumption was revised down to 2.11 percent from the second estimate of 2.44 percent. It accounted for 43 percent of the third-quarter growth. The lower personal consumption numbers reflect a decrease in spending on services such as healthcare and recreation. Additionally, spending on durable goods such as motor vehicles and parts also declined.

Amid the downward revisions, there were some positive takeaways from the latest report. Business investment was stronger than previously estimated, with nonresidential fixed investment revised up to 20.2 percent from 16.3 percent. Housing investment also saw an upward revision to 29.9 percent from 28.5 percent.

Meanwhile, government spending at all levels also made a positive contribution to the GDP growth. Federal, state, and local government spending was revised upward, indicating increased investment in infrastructure and other public projects.

The latest GDP data provides valuable insights into the performance of the U.S. economy in the third quarter. The lower-than-expected growth rate raises concerns about the pace of economic recovery amid ongoing challenges such as supply chain disruptions and labor shortages.

Furthermore, the downward revisions to personal consumption underscore the impact of rising inflation on consumer spending. With prices of goods and services on the rise, households may be cutting back on discretionary spending, which could have broader implications for the economy.

Looking ahead, policymakers and economists will closely monitor the evolving economic conditions to assess the need for any intervention or adjustments to support growth. As the economy continues to navigate through a complex set of challenges, a clear understanding of the evolving trends will be essential for making informed decisions.


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