GDP Growth Revised Down to 2% in Third Quarter

The U.S. Commerce Department yesterday released its final revision to the growth rate of the GDP in the third quarter.  Taking many by surprise, the already lackluster growth rate was revised down to 2%.

A month ago, the Commerce Department had predicted growth from July to September would come in at a rate of 2.2%.  And most economists believed that’s where the number would stay.  Today’s revision, the last planned for Q3, underscored the gradual slowdown of the U.S. economy.  But that’s not exactly new news to analysts.

"Nothing earth-shattering to see here," a Goldman Sachs economist wrote in an email to Marketwatch.

A dramatic cooling-off of the housing market was blamed for the drop, specifically decreased home-building activity.  Consumer spending and capital spending by businesses were both robust.

Not surprising that business spending should be so high; profits have risen at the fastest rate in more than 22 years in 2006.  Disposable personal incomes were also revised slightly higher, although when adjusted for inflation, incomes are fairly flat for the year.

Economists are still predicting that the economy will grow at about a 2% rate in the current fourth quarter and the first quarter of 2007.