122486570Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 5 percent in the third quarter of 2014, according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.6 percent.

The GDP estimate released this week is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 3.9 percent. With the third estimate for the third quarter, both personal consumption expenditures, or PCE, and nonresidential fixed investment increased more than previously estimated.

The increase in real GDP in the third quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, exports, state and local government spending, and residential fixed investment, according to the Bureau of Economic Analysis.

Imports, which are a subtraction in the calculation of GDP, decreased. The acceleration in the percent change in real GDP reflected a downturn in imports, an upturn in federal government spending and an acceleration in PCE that were partly offset by a downturn in private inventory investment and decelerations in exports, in state and local government spending, in residential fixed investment and in nonresidential fixed investment.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.4 percent in the third quarter, unrevised from the second estimate; this index increased 2 percent in the second quarter.

Excluding food and energy prices, the price index for gross domestic purchases increased 1.6 percent in the third quarter, compared with an increase of 1.7 percent. Real personal consumption expenditures increased 3.2 percent in the third quarter, compared with an increase of 2.5 percent in the second.

- Advertisement -

Durable goods increased 9.2 percent, compared with an increase of 14.1 percent. Nondurable goods increased 2.5 percent, compared with an increase of 2.2 percent. Services increased 2.5 percent, compared with an increase of .9 percent.

Real nonresidential fixed investment increased 8.9 percent in the third quarter, compared with an increase of 9.7 percent in the second. Investment in nonresidential structures increased 4.8 percent, compared with an increase of 12.6 percent.

Investment in equipment increased 11 percent, compared with an increase of 11.2 percent. Investment in intellectual property products increased 8.8 percent, compared with an increase of 5.5 percent.

Real residential fixed investment increased 3.2 percent, compared with an increase of 8.8 percent. Real exports of goods and services increased 4.5 percent in the third quarter, compared with an increase of 11.1 percent in the second. Real imports of goods and services decreased .9 percent, in contrast to an increase of 11.3 percent. Real federal government consumption expenditures and gross investment increased 9.9 percent in the third quarter, in contrast to a decrease of .9 percent in the second.

National defense increased 16 percent, compared with an increase of .9 percent. Nondefense increased .4 percent, in contrast to a decrease of 3.8 percent. Real state and local government consumption expenditures and gross investment increased 1.1 percent, compared with an increase of 3.4 percent.

The change in real private inventories subtracted .03 percent from the third-quarter change in real GDP after adding 1.42 percentage points to the second-quarter change. Private businesses increased inventories $82.2 billion in the third quarter, following increases of $84.8 billion in the second quarter and $35.2 billion in the first. Real final sales of domestic product — GDP less change in private inventories — increased 5 percent in the third quarter, compared with an increase of 3.2 percent in the second.

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 4.1 percent in the third quarter, compared with an increase of 4.8 percent in the second. Real gross national product — the goods and services produced by the labor and property supplied by U.S. residents — increased 5.3 percent in the third quarter, compared with an increase of 4.6 percent in the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased $13.3 billion in the third quarter, compared with an increase of $1.4 billion in the second; in the third quarter, receipts increased $13.2 billion, and payments increased less than $100 million.

Real gross domestic income, which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 4.7 percent in the third quarter, compared with an increase of 4 percent in the second.

Profits from current production — corporate profits with inventory valuation adjustment and capital consumption adjustment — increased $64.5 billion in the third quarter, compared with an increase of $164.1 billion in the second.

Profits of domestic financial corporations increased $16.1 billion in the third quarter, compared with an increase of $33.3 billion in the second. Profits of domestic nonfinancial corporations increased $32 billion, compared with an increase of $134.3 billion.

The rest-of-the-world component of profits increased $16.5 billion, in contrast to a decrease of $3.6 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the third quarter, receipts increased $14.4 billion, and payments decreased $2.1 billion.

Taxes on corporate income decreased $5.5 billion in the third quarter, in contrast to an increase of $45.7 billion in the second.

Profits after tax with IVA and CCAdj increased $70.1 billion, compared with an increase of $118.4 billion. Dividends decreased $3.9 billion in the third quarter, compared with a decrease of $500 million in the second. Undistributed profits increased $73.9 billion, compared with an increase of $118.8 billion. Net cash flow with IVA — the internal funds available to corporations for investment — increased $46.9 billion, compared with an increase of $133.4 billion. The IVA and CCAdj are adjustments that convert inventory withdrawals and depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic measures used in the national income and product accounts. IVA increased $16.7 billion in the third quarter, compared with an increase of $11.9 billion in the second. CCAdj increased $900 million, in contrast to a decrease of $800 million.

Profits of domestic financial corporations increased $16.2 billion in the third quarter, compared with an increase of $33.7 billion in the second. Profits of domestic nonfinancial corporations increased $31.1 billion, compared with an increase of $134.7 billion. The increase in profits of financial corporations primarily reflected an increase in “other” financial industries. The increase in profits of nonfinancial corporations primarily reflected increases in manufacturing, in wholesale trade and in “other” nonfinancial industries that were partly offset by a decrease in information.

Within manufacturing, the increase was widespread; the largest increase was in “other” durable goods industries. The largest offset was a decrease in chemical products. In the third quarter, both real gross value added of nonfinancial corporations and profits per unit of real gross value added increased. The increase in unit profits reflected an increase in unit prices and a decrease in unit labor costs that were partly offset by an increase in unit non-labor costs.