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Inventories Add to Third-Quarter GDP Estimates

Third-quarter gross domestic product (GDP) advanced ahead of initial estimates, the ""Bureau of Economic Analysis"":http://bea.gov/ (BEA) reported Thursday.

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For the ""second of its three quarterly GDP reports"":http://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm, BEA put economic growth at an annual rate of 3.6 percent in the third quarter, well ahead of the 2.8 percent growth projected in the preliminary report ""released early November"":https://themreport.com/articles/first-estimate-of-third-quarter-gdp-growth-beats-expectations-2013-11-07. Economists polled by ""_Bloomberg_"":http://www.bloomberg.com/markets/economic-calendar/ expected an average 3.1 percent revision.

The third and final estimate is scheduled for release December 20.

According to BEA, the revision reflects an increase in private inventory investment, which was far greater than previously estimated. Private businesses increased inventories by $116.5 billion in Q3 (compared to the original estimate of $86 billion), adding 1.68 percentage points to the change in real GDP, the bureau reported.

Real final sales of domestic product (GDP minus the change in private inventories) increased 1.9 percent, falling short of a 2.1 percent increase in the second quarter.

Other factors in last quarter's growth included personal consumption expenditures (PCE), exports, both nonresidential and residential fixed investment, and state and local government spending. Those gains were partly offset by a negative contribution from federal government spending and an increase in imports.

Personal consumption growth was 1.4 percent in the third quarter compared to a 1.8 percent increase in the second (and a 1.5 percent estimated increase in the first third-quarter release). Durable goods increased 7.7 percent (down from 7.8 percent in the first estimate), nondurable goods increased 2.4 percent (compared to 2.7 percent in the first release), and services were unchanged (shifting from a 0.1 percent tick up in the first report).

The GDP revisions were accompanied by a preliminary estimate of corporate profits in Q3; BEA estimates profits from current production increased $38.3 billion in Q3 compared to a $66.8 billion rise in Q2, while taxes on corporate income decreased $4.8 billion compared to a $10.0 billion increase the previous quarter.

Dividends fell $179.7 billion in the third quarter, reflecting Fannie Mae's large contributions to the government in the second quarter, BEA reported.

By industry, domestic profits at financial corporations increased $8.6 billion in the third quarter, a little more than a third of the increase recorded in the second. Domestic profits at nonfinancial corporations increased $13.0 billion compared to the second quarter's $37.8 billion.

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