EmailAccording to the advance estimate, GDP increased 2.0% in the third quarter, up from 1.3% growth in Q2 2012. The Briefing.com consensus expected GDP to increase 1.9%. Final sales, which exclude inventory changes, were up 2.1% after increasing 1.7% in the second quarter. Even though the upside surprise in GDP looks minor compared to the consensus headline, many economists lowered their forecasts following the durable goods report released yesterday. Thus, expectations were high that GDP would actually come in notably lower than consensus levels. That makes the surprise that much more significant. The reason for the upside surprise was likely due to an unexpected increase in government spending. Government spending ended eight consecutive quarters of declines and increased 3.7%. The gain was due to a 9.6% increase in federal spending as defense spending increased 13% and nondefense spending rose 3.0%.
State and local spending fell a minor 0.1%. That was the twelfth consecutive quarterly decline. The rest of the data was not materially different from most expectations. Consumption growth increased 2.0%, up from 1.5% growth in the second quarter. Goods spending rose 4.4% while services spending was up a relatively minor 0.8%. Nonresidential investment fell 1.3% after increasing 3.6% in Q2 2012. Structures investment declined 4.4% while equipment and software spending was flat. Residential investment rose a healthy 14.4%, which was the strongest gain since the homebuyer tax credit inflated construction levels. The net export deficit increased from $407.4 bln in Q2 2012 to $413.7 bln in the third quarter. Exports fell 1.6% while imports declined 0.2%.
