BEA Revises 3rd Quarter 2016 GDP Upward To 3.53%
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
The headline number has now been revised into a very healthy annualized growth rate slightly in excess of 3.5%. It is also good that the upward revision was broadly based -- reflecting both higher consumer spending and commercial investment. Some items of note in the report were:
-- The prior quarter's growth in consumer spending still took a major quarter-to-quarter hit. We believe that it is plausible that the "fear, uncertainty and doubt" (FUD) surrounding the election campaign contributed to lousy consumer sentiments and the corresponding consumer spending malaise. Although some portion of that has probably carried over into the current quarter, it may bode well for early 2017 as the "FUD" fades.
-- A large share of the reported "growth" in Federal spending has most likely only been brought forward from the 4Q-2016.
A 3.5% growth rate is impressive at any time, and it is especially so when domestic inflation is under 2% and comparable European growth is stuck at a rate that is a full 3% lower.