Today's Q3 GDP release beat expectations – the economy grew 2.0 percent in the third quarter, according to this first reading, while economists expected a 1.8 percent gain.
The main reason the report cited for the acceleration in Q3 GDP growth from Q2's 1.3 percent rate was "an upturn in federal government spending," which was a positive contribution to GDP since the third quarter of 2010.
And the primary driver of the spending increase came from investments in national defense.
In fact, defense spending amounted to 0.64 percentage points of the 2.0 percent rise in GDP – or 32 percent of the economic growth in the third quarter (click to enlarge):
So, if you stripped out defense spending, the economy grew closer to a 1.36 percent rate in Q3, closer to Q2's final estimate of 1.3 percent.
From the release:
Real federal government consumption expenditures and gross investment increased 9.6 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increased 13.0 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent. Real state and local government consumption expenditures and gross investment decreased 0.1 percent, compared with a decrease of 1.0 percent.
Here's a table from the report, showing the rise in government – and especially defense – spending (click to enlarge):
Click here for the full release >
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