Business situation: preliminary estimates for the third quarter of 2004

Survey of Current Business, Dec, 2004 by Brian C. Moyer, Shelly Smith, David F. Sullivan, Christopher Falcone

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Prices of goods and services purchased by consumers increased 1.1 percent after increasing 3.1 percent; food and energy prices increased less than in the second quarter. Excluding food and energy, prices paid by consumers increased 0.7 percent after increasing 1.7 percent.

Prices of private nonresidential fixed investment increased 1.0 percent after increasing 1.7 percent. Prices of equipment and software decreased after increasing slightly; in contrast, prices of structures increased more than in the second quarter.

Prices paid by government increased 3.4 percent after increasing 4.3 percent. Prices paid by the Federal Government slowed; both national defense and non-defense prices contributed to the deceleration. Prices paid by state and local governments increased 4.4 percent in the third quarter, 0.8 percentage point less than in the second.

The GDP price index, which measures the prices paid for goods and services produced in the United States, increased 1.3 percent, 0.5 percentage point less than the price index for gross domestic purchases. The smaller increase in the GDP price index reflected a smaller increase in export prices (which are included in the GDP price index) than in import prices (which are included in the price index for gross domestic purchases).

Revisions

The preliminary estimate of a 3.9-percent increase in real GDP in the third quarter is 0.2 percentage point more than the advance estimate released in October (table 9). In the past 20 years, the average revision, without regard to sign, from the advance estimate to the preliminary estimate has been 0.5 percentage point.

The upward revision to third-quarter real GDP reflected upward revisions to net exports and to consumer spending that were partly offset by a downward revision to inventory investment.

In the preliminary estimate, net exports added 0.35 percentage point more to the GDP growth rate than in the advance estimate. Exports increased more than previously reported, and imports (which are subtracted in the calculation of GDP) increased less. The revisions to both exports and imports mainly reflected the incorporation of newly available Census Bureau data on trade in goods for September.

Consumer spending contributed 0.30 percentage point more to GDP growth in the preliminary estimate than in the advance estimate. The upward revision to consumer spending mainly reflected the incorporation of revised Census Bureau data on retail sales for August and September.

Inventory investment contributed 0.43 percentage point less to GDP growth in the preliminary estimate than in the advance estimate. Within inventory investment, nonfarm inventories were revised down, and farm inventories were revised up. The downward revision to nonfarm inventory investment reflected the incorporation of newly available Census Bureau data on inventories for September and revised data for August. The upward revision to farm inventories reflected the incorporation of newly available data from the Department of Agriculture.