The Commerce Department released its final revision of third quarter Gross Domestic Product (GDP) on Thursday. According to the report, the U.S. economy grew by 2.2 percent on an annual pace, snapping a streak of four straight quarters of declining GDP.
The final third quarter GDP rate of 2.2 percent was a decline from the Commerce Department’s last estimate of 2.8 percent. The growth rate also fell short of analyst expectations for a final reading of 2.8 percent, according to a Bloomberg News survey.
Prior to the third quarter GDP gains, the U.S. economy had shrunk 3.8 percent over the previous 12 months as consumers drastically cut back and businesses buckled down in an effort to cut costs.
Corporate profits, which were previously estimated to have grown at 10.6 percent rate, were raised to 10.8 percent. That marks the largest gain earnings in over five years.
Those gains were helped by productivity gains, which were mainly reached by a reduction in overall labor costs. Major corporations cut headcount aggressively earlier this year, those moves have begun paying dividends with U.S. labor costs down 2.5 percent in the third quarter.
Exports of goods and services were also a positive catalyst in the third quarter, increasing 17.8 percent compared to a 4.1 percent decline in the prior quarter. The declining US Dollar has helped American exports become more competitive as they are now less costly to foreign buyers.
A true positive in the Commerce Department’s report was that the increase in government expenditures slowed to 8 percent in the period from 11.4 percent, while overall GDP still rose.
Over the past several quarters, government spending was making a larger and larger impact on GDP, leaving economists to worry if the economy could stand on its own without major government support.
