BEA Revises 1st Quarter 2017 GDP Growth Upward To 1.42% - Thursday, June 29

The Numbers, As Revised 

As a quick reminder, the classic definition of the GDP can be summarized with the following equation

GDP = private consumption + gross private investment + government spending + (exports - imports)

or, as it is commonly expressed in algebraic shorthand

GDP = C + I + G + (X-M)

In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows

The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left

Summary and Commentary 

This revision boosts the headline growth about a quarter percent to +1.42% -- better but still tepid. The notable takeaways from this report are

-- The largest upward revision was in consumer spending for healthcare and insurance. 

-- The growth rate for consumer spending on goods remains anemic. 

-- The inventory contraction worsened, possibly in anticipation of softer future consumer spending. 

-- Foreign trade remained a bright spot and is not a drag on the headline number. 

The US consumer may be spending more, but that increased spending is not on discretionary "life-style" goods. And as per usual, the Fed is once again projecting a return to "normalcy" in the form of 3% growth in future quarters -- with consumer spending leading the way. But if this past quarter's pattern persists those consumers may continue to face a toxic mix of stagnant disposable income, rising insurance costs and shrinking savings -- not exactly a formula for happy campers. 

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