3Q GDP final estimate

It turns out that the US economy is doing even better than we thought. The third estimate of U.S. 3rd quarter GDP from the BEA showed a healthy 5.0% growth rate. This is well above the advanced estimate 2 months ago of a 3.5% growth rate and the second estimate last month of a 3.9% growth rate. Economists had forecast a growth rate of 4.3%
One of the major contributors to the spurt in growth was increased business investment. Investment in equipment was up by 11.0%. Investment in intellectual property products (IPP), i.e. research and development; entertainment, literary, and artistic originals; and software grew by 8.8% in the 3rd quarter. IPP investments had increased by 5.5% in the 2nd quarter. Earlier reports had IPP investments growing by 4.2% in the advanced estimate and 6.4% in the second estimate. As the charts below show, the growth in IPP is volatile and does not track overall GDP growth.
These changes from earlier estimates highlight that there is room for improvement in the data collection. For example, the data on R&D expenditures is collected on an annual bases and then used to estimate the quarterly data (see the BEA report “Measuring R&D in the National Economic Accounting System”). Thus there is a need for an annual revision to the data that can be sometimes significant.
Note that the measurement of intellectual property products by the BEA does not encompass all types of intangible assets. Clearly, the inclusion of R&D and entertainment, literary, & artistic originals in the GDP as an investment was a major step forward. But more work on measuring other intangibles still needs to be done.
IPP percent 3Q14 - 3rd.png
GDP-IPP 3Q14 - 3rd.png

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s