Inventories And Low Deflator Boost Low GDP Estimate

  • The headline contribution from consumer expenditures for goods increased to a +1.11% growth rate (up +0.34% from the prior quarter).
  • The contribution to the headline from consumer spending on services declined to +0.58% (down -0.68% from the prior quarter). Most of the decline appeared in spending for housing and utilities. The combined consumer contribution to the headline number was +1.69%, down -0.34% from 3Q-2016.
  • The headline contribution from commercial private fixed investments was +0.67%, up +0.65 from an essentially flat prior quarter. That growth is about equally split between residential and commercial construction.
  • The contribution from inventories was +1.00%, more than double the +0.49% growth rate recorded during the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity price or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.
  • The positive headline contribution from governmental spending improved by +0.07% to +0.21%. The entirety of this increase was in state and local capital expenditures, with Federal expenditures contracting (-0.08%, as expected) as they "gave back" the fiscal year-end spending previously moved forward -- a recurring annual phenomenon that artificially boosts pre-election economic reports.
  • Exports crashed into contraction (-0.53%) quarter-to-quarter, down -1.69% from the prior quarter.
  • Imports subtracted yet another -1.17% from the headline number, down -0.86% from the prior quarter.
  • The "real final sales of domestic product" was a relatively weak +0.87%, down over 2% (-2.17%) from the prior quarter. This is the BEA's "bottom line" measurement of the economy and it excludes the reported inventory growth.
  • As mentioned above, real per-capita annual disposable income was reported to have grown by $177 quarter-to-quarter. At the same time the household savings rate declined yet another -0.2% to 5.6%, now some -0.3% lower than the level recorded in the second quarter of 2016. It is important to keep this line item in perspective: real per-capita annual disposable income is up only +7.44% in aggregate since the second quarter of 2008 -- a meager annualized +0.85% growth rate over the past 34 quarters.
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