This week's GDP report, the second GDP estimate for the 2013 third quarter, brings good news, though perhaps not as good as it seems. The report revised the growth rate up to 3.6% (the first estimate was 2.8%). Quarterly growth data since 2003 is graphed below.
There is nothing wrong with 3.6%. After all, that is the best single quarter since the end of 2011. On the other hand, the big growth came to business inventories which contributed almost half of the GDP growth of the period (1.68 of the 3.6%).
Here is the breakdown of the contributions from the four major components of GDP:
- Consumption: +0.96%
- Investment: +2.49%
- Government: +0.09%
- Net Exports: +0.07%
Remember that private inventory is part of investment.