US GDP accelerated to 3.9% annual rate in Third Quarter; Goods export growth was the largest since the fourth quarter of 1996

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US GDP accelerated to 3.9% annual rate in Third Quarter; Goods export growth was the largest since the fourth quarter of 1996
By Finfacts Team
Oct 31, 2007, 12:31

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Real US gross domestic product -- the output of goods and services produced by labour and property located in the United States -- increased at an annual rate of 3.9 percent in the third quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent and 0.6 percent in the first quarter.

The price index for personal consumption expenditures rose by 1.7 percent after increasing 4.3 percent in the second quarter. The closely watch core price PCE price benchmark excluding food and energy accelerated, rising 1.8 percent, but within the Federal Reserve's target zone, after increasing 1.4 percent in the second quarter.

Foreign trade contributed 0.93 percentage point to GDP in the third quarter. US exports surged 16.2 percent and imports increased 5.2 percent. In the second quarter, trade added 1.32 percentage points to GDP; exports in that period were 7.5 percent higher and imports fell by 2.7 percent.

US market participants are still hoping that the Fed will announce a cut in the Federal funds rate from its current level of 4.75% when it announces its decision on rates at 2:15 pm EST today Wednesday.

GDP

Sources of real GDP growth in the third quarter:

Personal consumption growth rebounded to 3.0 percent after rising 1.4 percent in the second quarter.
Goods export growth was the largest since the fourth quarter of 1996.

In contrast:

Housing registered a bigger decline than in the second quarter.
Import growth resumed after a decline in the second quarter.

Prices

Led by a decline in energy prices, prices of goods and services purchased by U.S. residents decelerated in the third quarter, rising 1.6 percent after rising 3.8 percent in the second quarter.

Personal Income

Real disposable personal income—income adjusted for inflation and taxes—increased 4.4 percent in the third quarter, compared with a 0.6 percent increase in the second quarter. The higher growth rate reflected the decline in inflation.