Commerce Department Revises 3rd Quater GDP Downward… Again

Two months the media and Obama Administration were trumpeting the announcement that third quarter GDP had grown at an annualized rate of 3.5%. Unfortunately, their celebrations were a bit premature the Commerce Department today announced their final estimate of third quarter GDP… Not surprisingly third quarter GDP was a lot lower than they originally estimated:

Third-quarter GDP was originally estimated two months ago at a 3.5% annualized rate but was revised down to 2.8% growth in last month’s estimate. The revisions come from more complete data than was available at the first and second estimates.

The 2.2% revised growth rate is the strongest since the third quarter of 2007, just before the recession began.

Still, economists surveyed by MarketWatch had been expecting only a minor revision to 2.7% in the third estimate. See our complete economic calendar.

Economists are forecasting stronger growth — about 4% on an annualized basis — in the fourth quarter ending Dec. 31. They also see annualized growth of about 3% in the first half of 2010.

The revisions to third-quarter GDP were in three major areas: Business investment, consumer spending, and inventories.

Final sales increased at a 1.5% annual pace, revised from 2.5%. Gross domestic purchases — sales to U.S. residents — rose at a 3% annual rate, revised down from 4%.

The revisions shouldn’t surprise anyone, as Ed Morrissey notes the first-time home buyer tax credit and the Cash for Clunkers program accounted for roughly half of the original estimate of 3.5%. Assuming they still account for 1.5% of the final estimate that leaves a rather anemic 0.7% growth in the third quarter… That’s not a recovery, that’s life support!

James Pethokoukis has more on the political implications here.