Revised 3Q GDP and intangibles

BEA has revised its estimate of economic growth up significantly this morning. The second estimate of the 3rd quarter GDP now shows that the U.S. economy grew 3.6% compared to the advanced estimate of 2.8%. Economists had been expecting a slight upward revision to 3.1% or 3.2%. Much of the upward revision was due to a greater increase than earlier estimated in private inventory. While the higher level of growth is welcome news, the inventory build up is not so good news. Unless demand also picks up, higher inventories mean a slowdown in production later on to reduce the inventory overhang.
The good news is the business investment was revised upward from a growth rate of 3.5% from the advanced estimate of 1.6%. That improvement was due to a significant upward revision of equipment investment from a -3.7% to 0.0%.
However, the growth in investments in intellectual property products (i.e. research and development; entertainment, literary, and artistic originals; and software) was revised downward. Last month’s advanced estimate of the growth in this area was 2.2%. That has now been revised to 1.7%. Still, that is better that the decline of 1.5% in the 2nd quarter.
IPP percent 3Q13 -2nd.png

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