Economy Watch: Third Quarter Enjoys GDP Surge

Strong commercial real estate investment was one of the main economic activities that contributed to third-quarter GDP's boost.
Source: Bureau of Economic Analysis, Gross Domestic Product: Third Quarter 2016 (Advance Estimate)

Source: Bureau of Economic Analysis, Gross Domestic Product: Third Quarter 2016 (Advance Estimate)

Real gross domestic product increased at an annualized rate of 2.9 percent during the third quarter of 2016, according to the first (or advance) estimate released Friday by the Bureau of Economic Analysis. Economists expected an increase, but that much was more than expected. During the second quarter, real GDP increased 1.4 percent.

Most kinds of economic activity gave third-quarter real GDP a boost, including positive contributions from personal consumption expenditures (people spending their money), exports, private inventory investment, federal government spending, and nonresidential fixed investment (largely commercial real estate). Those were partly offset by negative contributions from residential fixed investment and state and local government spending.

Disposable personal income increased $125.3 billion, or 3.6 percent, in the third quarter, compared with an increase of $140.6 billion ( or 4.1 percent) in the second, the BEA said. Real disposable personal income, however, increased 2.2 percent, compared with an increase of 2.1 percent.

The bureau stressed that the third-quarter advance estimate is based on source data that are incomplete or subject to further revision. The second estimate for the third quarter, based on more complete data, will be released on Nov. 29. Usually (but not always), revised estimates tend to be larger than first estimates, so that could bode well for the economy and perhaps help encourage the Fed to raise interest rates.