The Commerce Department reported that real economic growth in the third quarter was revised downward, from an annualized rate of 2.5 percent as reported a month ago to a rate of 2.0 percent. This was the second of three estimates for economic activity during the July-to-September period with the final reading to be provided at the end of December.

The overall revision was primarily due to a large drop in business inventories, from an advance estimate of +$5.4 billion last month to this month’s estimate of -$8.5 billion. The replacement of estimated inventory data with actual data during the second reading on GDP is often the cause for large revisions to the overall growth figure. In this case, inventories accounted for a change of -0.43 percentage points to GDP growth, nearly the entire revision.

Exports were revised upward and consumer spending was lower than previously reported as health care and housing/utility spending accounted for nearly half of real economic growth in Q3, contributing 0.61 percentage points and 0.38 percentage points, respectively.