October 29, 2010
While inventories grew at a $115.9 billion annual rate in the third quarter — the highest increase since the first quarter of 1998 — the latest Bureau of Economic Analysis report suggests a picture of an economy that may be skirting zero growth in the next two quarters. Final demand growth, which excludes fluctuations in inventories, was just 0.6 percent in the third quarter. It has averaged just 1.0 percent in the five quarters since the recession officially ended in the second quarter of 2009. It’s unlikely the rate of inventory accumulation will accelerate even more in future quarters.
A major contributor to growth in the third quarter was consumption, which grew at a 2.6 percent annual rate and added 1.79 percentage points to GDP growth. Housing and utilities added 0.42 percentage points to growth, almost one-fourth of the contribution from consumption. This is likely due to utilities, since an unusually hot summer resulted in a larger household demand for energy.
For more information, read the full GDP Byte or check out the interactive graph on Graphic Economics.
