U.S. growth revised up to 4%
Corporate profits down 1.8% in third quarter
By Rex Nutting, CBS.MarketWatch.com
Last Update: 9:40 AM ET Nov. 26, 2002
WASHINGTON (CBS.MW) -- A surge of auto sales and an uptick in business investment propelled growth in the U.S. economy to a 4 percent pace in the third quarter, ahead of the 3.1 percent reported just a month ago, the Commerce Department estimated Tuesday.
Mortgage Expo makes shopping for a loan quick and easy. Compare rates from over 800 lenders and 10,000 loan programs.
Start Looking for a loan Type of Loan...RefinanceDebt ConsolidationEquityCredit ProblemsFirst Home BuyerPurchaseHome ImprovementSecond Mortgage
6 Month ARM1 Year ARM5 Year ARM10 Year ARM15 Year Fixed15 Year Jumbo30 Year Fixed30
Final sales rose 3.5 percent.
The economy has grown 3.2 percent in the past year, the fastest growth in two years.
Inflation remained subdued. The broadest measure of inflation in the economy rose at a 1.2 percent annual rate, about half the rate of the second quarter. Prices for consumers rose at a 1.7 percent rate. Read the full release.
The main sources of the revision were higher inventory building, larger investments in homes and more spending by state and local governments, compared with the first estimate.
Economic corporate profits declined for the third straight quarter, falling 1.8 percent from the second quarter, the government agency estimated. Profits are up 12.2 percent from the third quarter of 2001. Profits per unit of output fell, reflecting lower prices received and slightly higher nonlabor costs.
"The real story in the data is the continued drop in corporate profits," said Drew Matus, economist at Lehman Brothers. "Given the recent wave of cost cutting, this suggests that revenue growth was less than expected during the quarter. This is a negative development for the equity market."
"The economic recovery is cold-comfort for investors starved for earnings," said Ed Peters, chief investment officer at PanAgora Asset Management.
U.S. gross domestic product has exhibited a stop-and-start pattern in recent quarters. After five quarters of slow or negative growth, the economy grew 2.7 percent in last year's fourth quarter and 5 percent in the first quarter of this year before slowing to 1.3 percent in the second quarter.
After the third-quarter acceleration, economists are looking for another slow-growth phase in the current quarter. See Economic Calendar and Forecast.
The Federal Reserve slashed its overnight lending rate to a four-decade-low of 1.25 percent in early November, hoping to arrest a decline in business and consumer confidence that threatened to throw the nation into a second recession. See full story.
The GDP report is "likely to provide some sentiment lift as it further distances economic growth from the impression of 'double-dipping,'" said Mat Johnson, economist at Thomas Weisel Partners.
A double-dip recession looks impossible next to the 4 percent growth reported in the third quarter. But the composition of growth was very uneven during the quarter; much of it was unsustainable. Consumers have been carrying the economy, while businesses sit on the sidelines.
A large part of the growth was due to a surge in auto sales, boosted by another round of incentives from the automakers. Consumer spending rose 4.1 percent, including a 23.1 percent jump in durable-goods purchases.
Auto sales -- which represent about 4 percent of final sales -- accounted for 42 percent of growth in the quarter.
Investment accounted for about a fourth of the gain in GDP. Investments in equipment and software rose 6.6 percent, the second quarter of modest growth after seven disastrous quarters for investment.
Investments in structures, on the other hand, fell by 20.6 percent, worse than the first estimate of a 16 percent drop. It's the fourth double-digit drop in a row and the sixth decline in the past seven quarters.
"The only weak spot was investment in structures," said Joel Naroff, president of Naroff Economic Advisers. "So what. Should we worry that the economy is going into a double-dip because we are not building office building or new plants? Give me a break."
Businesses also rebuilt their inventories, adding $15.5 billion to their stocks, up from the $1.9 billion estimated earlier. The gain in inventories added about 0.5 percentage points to GDP.
Trade neither added to nor subtracted from GDP. Growth in trade slowed sharply. Exports grew 3.3 percent after rising 14.3 percent in the second quarter. Imports grew 2.3 percent after soaring 22.2 percent in the second quarter.
Government spending added about 0.6 percentage points to GDP. Federal spending rose 4.3 percent -- the slowest growth in a year. Defense spending jumped 7.1 percent, also the slowest in a year. Nondefense spending fell 0.7 percent.
Spending by state and local governments rose 2.4 percent. State spending should slow as programs are cut to balance budgets.
Rex Nutting is Washington bureau chief of CBS.MarketWatch.com
Corporate profits down 1.8% in third quarter
By Rex Nutting, CBS.MarketWatch.com
Last Update: 9:40 AM ET Nov. 26, 2002
WASHINGTON (CBS.MW) -- A surge of auto sales and an uptick in business investment propelled growth in the U.S. economy to a 4 percent pace in the third quarter, ahead of the 3.1 percent reported just a month ago, the Commerce Department estimated Tuesday.
Mortgage Expo makes shopping for a loan quick and easy. Compare rates from over 800 lenders and 10,000 loan programs.
Start Looking for a loan Type of Loan...RefinanceDebt ConsolidationEquityCredit ProblemsFirst Home BuyerPurchaseHome ImprovementSecond Mortgage
6 Month ARM1 Year ARM5 Year ARM10 Year ARM15 Year Fixed15 Year Jumbo30 Year Fixed30
Final sales rose 3.5 percent.
The economy has grown 3.2 percent in the past year, the fastest growth in two years.
Inflation remained subdued. The broadest measure of inflation in the economy rose at a 1.2 percent annual rate, about half the rate of the second quarter. Prices for consumers rose at a 1.7 percent rate. Read the full release.
The main sources of the revision were higher inventory building, larger investments in homes and more spending by state and local governments, compared with the first estimate.
Economic corporate profits declined for the third straight quarter, falling 1.8 percent from the second quarter, the government agency estimated. Profits are up 12.2 percent from the third quarter of 2001. Profits per unit of output fell, reflecting lower prices received and slightly higher nonlabor costs.
"The real story in the data is the continued drop in corporate profits," said Drew Matus, economist at Lehman Brothers. "Given the recent wave of cost cutting, this suggests that revenue growth was less than expected during the quarter. This is a negative development for the equity market."
"The economic recovery is cold-comfort for investors starved for earnings," said Ed Peters, chief investment officer at PanAgora Asset Management.
U.S. gross domestic product has exhibited a stop-and-start pattern in recent quarters. After five quarters of slow or negative growth, the economy grew 2.7 percent in last year's fourth quarter and 5 percent in the first quarter of this year before slowing to 1.3 percent in the second quarter.
After the third-quarter acceleration, economists are looking for another slow-growth phase in the current quarter. See Economic Calendar and Forecast.
The Federal Reserve slashed its overnight lending rate to a four-decade-low of 1.25 percent in early November, hoping to arrest a decline in business and consumer confidence that threatened to throw the nation into a second recession. See full story.
The GDP report is "likely to provide some sentiment lift as it further distances economic growth from the impression of 'double-dipping,'" said Mat Johnson, economist at Thomas Weisel Partners.
A double-dip recession looks impossible next to the 4 percent growth reported in the third quarter. But the composition of growth was very uneven during the quarter; much of it was unsustainable. Consumers have been carrying the economy, while businesses sit on the sidelines.
A large part of the growth was due to a surge in auto sales, boosted by another round of incentives from the automakers. Consumer spending rose 4.1 percent, including a 23.1 percent jump in durable-goods purchases.
Auto sales -- which represent about 4 percent of final sales -- accounted for 42 percent of growth in the quarter.
Investment accounted for about a fourth of the gain in GDP. Investments in equipment and software rose 6.6 percent, the second quarter of modest growth after seven disastrous quarters for investment.
Investments in structures, on the other hand, fell by 20.6 percent, worse than the first estimate of a 16 percent drop. It's the fourth double-digit drop in a row and the sixth decline in the past seven quarters.
"The only weak spot was investment in structures," said Joel Naroff, president of Naroff Economic Advisers. "So what. Should we worry that the economy is going into a double-dip because we are not building office building or new plants? Give me a break."
Businesses also rebuilt their inventories, adding $15.5 billion to their stocks, up from the $1.9 billion estimated earlier. The gain in inventories added about 0.5 percentage points to GDP.
Trade neither added to nor subtracted from GDP. Growth in trade slowed sharply. Exports grew 3.3 percent after rising 14.3 percent in the second quarter. Imports grew 2.3 percent after soaring 22.2 percent in the second quarter.
Government spending added about 0.6 percentage points to GDP. Federal spending rose 4.3 percent -- the slowest growth in a year. Defense spending jumped 7.1 percent, also the slowest in a year. Nondefense spending fell 0.7 percent.
Spending by state and local governments rose 2.4 percent. State spending should slow as programs are cut to balance budgets.
Rex Nutting is Washington bureau chief of CBS.MarketWatch.com
