11/29/12 11:08 AM – GDP Report on US Economic Growth

The revised report for US economic growth in the 3rd quarter of 2012, referred to as Gross Domestic Product (GDP for short) came in at 2.7% growth, up from the first estimate of 2%.

But, the report was a mixed bag. For starters, all of the 0.7% increase from the first estimate came from a buildup of inventories, something that may get taken back in the 4Q, making the 4th quarter number lower than otherwise.

What economists call real growth, which is growth minus the inventory adjustment, was 1.9%, up from 1.3% the previous quarter, so that is good news, though 1.9% growth is not much to get excited about. European countries would gladly take it, though.

Unfortunately, the estimate on 3Q consumer spending was lowered to 1.4% from the original estimate of 2%. That is not so good.

Also, business spending, originally estimated at -1.4% was revised down to -2.2%, which is awful.

Government spending rose 3.5%. That is a number I would like to see lower, either flat or 1%.

Finally, corporate profits were up 18.6% over the year before, which is terrific for the stock market. It has only risen 2% since a year ago but it should rise in tandem with the increase in profits, so that gives us some fuel for the stock market.

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