Political India: Engaging America

Exerting additional downward pressure on an already-muted rate of economic growth in the United States economy the U.S. Commerce Department cut third quarter growth estimates for 2011 from 2.5 per cent to 2 per cent.

The bad news on the growth front compounded Monday's failure in the Congressional supercommittee on deficit reduction, as a gridlock over tax increases and cuts to welfare programmes forestalled a deal on spending cuts to the tune of $1.2 trillion.

In a statement the Commerce Department's Bureau of Economic Analysis (BEA) said that real gross domestic product increased at an annual rate of 2 per cent in the third quarter of 2011, that is from the second quarter to the third quarter, as per a second estimate of the BEA.

In an “advanced” estimate of the growth rate issued in October the BEA had noted that the increase in real GDP was 2.5 per cent; yet it justified the estimate downgrade because “The GDP estimates released today are based on more complete source data than were available for the ‘advance' estimate issued last month.”

Sector level

Deconstructing the various components of the latest growth figure, the BEA said that the rise in real GDP in the third quarter “primarily reflected positive contributions from personal consumption expenditures non-residential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending.” Imports, the BEA added, increased during the period.

At the sector level, final sales of computers were said to have added 0.22 percentage points to the third-quarter change in real GDP after adding 0.07 percentage points to the second quarter change. Similarly, motor vehicle output reportedly contributed 0.18 percentage points following a negative figure of 0.10 percentage point in the second quarter change.

The 0.5 percentage point drop in the most recent estimate of the third quarter increase in real GDP implied that GDP was $15 billion lower than the advance estimate and this lower value primarily reflected downward revisions to private inventory investment, non-residential fixed investment, and personal consumption expenditures, the BEA said.