BEA Revises 3rd Quarter 2017 GDP Growth Down Slightly To 3.16%

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 BEA generally gets its numbers right at times when the economy and economic growth are relatively stable. We suspect that these particular numbers are not likely to be significantly revised during the next annual historical revisions in July 2018. The notable takeaways from this report are 

-- Inventory growth provides a quarter of the headline number. As mentioned before, inventory growth is noisy and mean reverting. What it gives in this quarter it will take away somewhere down the road. 

-- Despite rising and inescapable healthcare costs, the growth in spending on consumer services was the lowest since the second quarter of 2013. The consumer services sector has been a major driving factor in this economy over the past decade, and that growth may very well have maxed out. 

-- Household disposable income remains miserable. There remains no material growth and savings remains at the lowest levels since the very bottom of the "Great Recession." This means that a significant portion of the already softening consumer spending came from savings, not paychecks. 

A relatively stable headline number that is somewhat above 3% is just cause for satisfaction, if not celebration. Inventory buildups and stressed households are the cautionary tales in this final 3Q-2017 report. 

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