MBS MID-DAY: Holding Gains Despite Better-Than-Expected GDP


Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — increased at an annual rate of 2.0 percent in the third quarter of 2012 (that
is, from the second quarter to the third quarter), according to the “advance” estimate released by the
Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The Bureau emphasized that the third-quarter advance estimate released today is based on source
data that are incomplete or subject to further revision by the source agency (see box below). The
“second” estimate for the third quarter, based on more complete data, will be released on November 29,

The increase in real GDP in the third quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), federal government spending, and residential fixed
investment that were partly offset by negative contributions from exports, nonresidential fixed
investment, and private inventory investment. Imports, which are a subtraction in the calculation of
GDP, decreased.

The acceleration in real GDP in the third quarter primarily reflected an upturn in federal
government spending, a downturn in imports, an acceleration in PCE, a smaller decrease in private
inventory investment, an acceleration in residential fixed investment, and a smaller decrease in state and
local government spending that were partly offset by downturns in exports and in nonresidential fixed

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