BEA Revises 3rd Quarter 2017 GDP Growth Upward To 3.30%

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 improved headline growth rate comes from upward revisions to commercial fixed investment and inventories. Consumer activity did not materially impact this revision. The notable takeaways from this report are

-- Inventory growth is again distorting the headline. 

-- Household disposable income took another hit. Less money was available, and less money was saved -- so that a significant portion of the already softening consumer spending came from savings, not paychecks. 

A happy headline number that results from inventory buildups and consumer spending from diminished savings merits at least some caution, particularly whilst listening to the ongoing "growing economy" narrative that fully anticipates a banner holiday spending season. 

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