US real gross domestic product (GDP) -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.3 percent in the third quarter of 2008, (that is, from the second quarter to the third quarter), according to advance estimates released by the US Bureau of Economic Analysis.  In the second quarter, real GDP increased 2.8 percent. The biggest GDP component is consumer spending, which accounts for about 70% of GDP. Third-quarter spending fell 3.1 percent - first decline since 1991, after increasing 1.2 percent in the second quarter. The drop was the sharpest since 8.6 percent in second-quarter 1980.

``The crisis really kicked up in late September,'' Ethan Harris, co-head of US economic research at Barclays Capital in New York, said in a Bloomberg Television interview. ``We're going to be looking at a very unfriendly GDP number in the fourth quarter, with a drop of 2 to 4 percent.''

The Bureau emphasized that the third-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency .  The third-quarter "preliminary" estimates, based on more comprehensive data, will be released on November 25, 2008.

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

Most of the major components contributed to the downturn in real GDP growth in the third quarter.  The largest contributors were a sharp downturn in PCE for nondurable goods, a smaller decrease in imports, a larger decrease in PCE for durable goods, and a deceleration in exports.  Notable offsets were an upturn in inventory investment and an acceleration in federal government spending.

Final sales of computers contributed 0.06 percentage point to the third-quarter change in real GDP after contributing 0.17 percentage point to the second-quarter change.  Motor vehicle output contributed 0.09 percentage point to the third-quarter change in real GDP after subtracting 1.01 percentage points from the second-quarter change.

Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified.  Quarter-to-quarter dollar changes are differences between these published estimates. Percent changes are calculated from unrounded data and are annualized.  "Real" estimates are in chained (2000) dollars.  Price indexes are chain-type measures.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 4.8 percent in the third quarter, compared with an increase of 4.2 percent in the second. Excluding food and energy prices, the price index for gross domestic purchases increased 3.1 percent in the third quarter, compared with an increase of 2.2 percent in the second.

Real personal consumption expenditures decreased 3.1 percent in the third quarter, in contrast to an increase of 1.2 percent in the second.  Durable goods decreased 14.1 percent, compared with a decrease of 2.8 percent.  Nondurable goods decreased 6.4 percent, in contrast to an increase of 3.9 percent.  Services expenditures increased 0.6 percent, compared with an increase of 0.7 percent.

Real nonresidential fixed investment decreased 1.0 percent in the third quarter, in contrast to an increase of 2.5 percent in the second.  Nonresidential structures increased 7.9 percent, compared with an increase of 18.5 percent.  Equipment and software decreased 5.5 percent, compared with a decrease of 5.0 percent.  Real residential fixed investment decreased 19.1 percent, compared with a decrease of 13.3 percent.

Real exports of goods and services increased 5.9 percent in the third quarter, compared with an increase of 12.3 percent in the second.  Real imports of goods and services decreased 1.9 percent, compared with a decrease of 7.3 percent.

Real federal government consumption expenditures and gross investment increased 13.8 percent in the third quarter, compared with an increase of 6.6 percent in the second.  National defense increased 18.1 percent, compared with an increase of 7.3 percent.  Nondefense increased 4.8 percent, compared with an increase of 5.0 percent.  Real state and local government consumption expenditures and gross investment increased 1.4 percent, compared with an increase of 2.5 percent.

The real change in private inventories added 0.56 percentage point to the third-quarter change in real GDP after subtracting 1.50 percentage points from the second-quarter change.  Private businesses decreased inventories $38.5 billion in the third quarter, following a decrease of $50.6 billion in the second quarter and a decrease of $10.2 billion in the first.

Real final sales of domestic product -- GDP less the change in private inventories -- decreased 0.8 percent in the third quarter, in contrast to an increase of 4.4 percent in the second.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- decreased 1.3 percent in the third quarter, compared with a decrease of 0.1 percent in the second.

Disposition of personal income

Current-dollar personal income increased $31.0 billion (1.0 percent) in the third quarter, compared with an increase of $228.4 billion (7.9 percent) in the second.  The deceleration primarily reflected a downturn in personal current transfer receipts due to the effects of the second-quarter rebates to individuals who pay no income taxes (or for whom the rebate exceeded the amount of taxes they pay) from the Economic Stimulus Act of 2008.

Personal current taxes increased $133.4 billion in the third quarter, in contrast to a decrease of $180.9 billion in the second.  The sharp upturn reflected the second-quarter rebates to individuals with tax liabilities, which were treated as an offset to taxes.

Disposable personal income decreased $102.4 billion (3.7 percent) in the third quarter, in contrast to an increase of $409.3 billion (16.7 percent) in the second.  Real disposable personal income decreased 8.7 percent, in contrast to an increase of 11.9 percent.

Personal outlays increased $54.5 billion (2.1 percent) in the third quarter, compared with an increase of $133.3 billion (5.2 percent) in the second. Personal saving -- disposable personal income less personal outlays -- was $139.7 billion in the third quarter, compared with $296.6 billion in the second.  The personal saving rate -- saving as a percentage of disposable personal income -- was 1.3 percent in the third quarter, compared with 2.7 percent in the second.  Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 3.8 percent, or $134.7 billion, in the third quarter to a level of $14,429.2 billion.  In the second quarter, current-dollar GDP increased 4.1 percent, or $143.7 billion.