Putting fears of a looming recession at rest for now, nonresidential fixed investment jumped 16.3 percent in the third quarter of 2011 following a revised 9.2 percent increase in the previous quarter of this year, according to the October 27 Gross Domestic Report (GDP) report by the Department of Commerce. Nonresidential fixed investment in structures increased for the second straight quarter this year, up 13.3 percent in the third quarter following a 22.6 percent increase in the second quarter. Fixed investment in equipment and software expanded 17.4 percent last quarter following a 6.2 percent increase in the second quarter.
Residential fixed investment grew 2.4 percent in the third quarter after a 4.2 percent loss in the second quarter. Exports grew 4 percent in the third quarter as exports of goods were up 4.7 percent and exports of services increased by 2.4 percent. Imports were up 1.9 percent for the quarter as imports of goods increased by 1.8 percent and imports of services increased 2.4 percent.
Personal consumption expenditures increased 2.4 percent in the third quarter as expenditures of services were up 3.2 percent and expenditures in goods increased 1.4 percent. Changes in real private inventories subtracted 1.1 percent to the third-quarter change in real GDP. Private businesses increased inventories by $5.4 billion for the quarter. Real final sales of domestic product – GDP less change in private inventories – increased 3.2 percent for the quarter following a 1.3 percent increase in the second quarter.
Federal government spending increased 2 percent in the third quarter as national defense spending rose 4.8 percent and nondefense spending decreased 3.7 percent. State and local governments decreased spending for the fifth consecutive quarter, down by 1.3 percent in the third quarter.
Gross domestic purchases – purchases by U.S. residents of goods and services wherever produced – increased 2.2 percent in the third quarter following a 1 percent increase in the second quarter. Overall, real gross domestic product (GDP) increased 2.5 percent in the third quarter following a revised 1.3 percent increase in the second quarter.
“Today’s third quarter GDP report puts any talk of an imminent recession to rest for now,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Indeed, economic data released over the past month have been surprisingly good.
“Today’s report shows that a growing share of American corporations are willing to spend money to spur top-line and bottom-line expansion,” Basu said. “However, this does not signify that the nonresidential construction industry is set to boom.
“Public sector support for construction services is likely to be flat at best, and job growth remains halted and lending disciplined,” said Basu. “But the overall economic outlook for the nonresidential construction industry has improved materially over the past several weeks.
“Eventually, the investment in equipment software and structures will trend late into expanded hiring. Capital and labor go together and what the United States is now experiencing is acceleration in capital formation,” said Basu.
“That, in turn, will help trigger more demand for construction services, whether in the form of office buildings, apartments, or shopping centers. In short, the improved outlook for the broader economy in 2012 signals more recovery for construction activities in 2013 than were contemplated just a few weeks earlier,” Basu said.