In their second estimate of the US GDP for the second quarter of 2018, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +4.23% annual rate, up +0.16% from their previous estimate and up +2.01% from the prior quarter.
None of the reported revisions were material. The growth rate for consumer spending for services was revised lower by -0.12%, and there was a -0.03% decline in the growth rate of consumer spending on goods. The contraction rate for inventories moderated slightly (+0.03%) to -0.97%, while the growth rate in commercial fixed investment rose by +0.13% to +1.07%. The growth rate for imports improved +0.13%.
Household disposable income was revised lower by $9 per annum, and the household savings rate was unchanged from the previous report at 6.8% (although that previous report contained extensive and significant upward revisions to historic savings rates).
For this revision the BEA assumed an effective annualized deflator of 3.24%. During the same quarter (April 2018 through June 2018) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was significantly lower at 2.26%. Over estimating inflation results in pessimistic growth rates, and if the BEA’s “nominal” data was deflated using CPI-U inflation information the headline growth number would have been much higher at a +5.36% annualized growth rate.
Among the notable items in the report :
— The headline contribution from consumer expenditures for goods was revised downward -0.12% to +1.12% (but still up +1.25% from the prior quarter).
— The contribution to the headline from consumer spending on services dropped -0.03% to +1.43%. The combined consumer contribution to the headline number was +2.55%, up over 2% (+2.19%) from 1Q-2018.
— The headline contribution from commercial private fixed investments was +1.07%, down -0.27% from the prior quarter.
— Inventories subtracted -0.97% from the headline number. 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 growth in governmental spending was up slightly, adding +0.41% to the headline number (and up +0.14% from the prior quarter).
— Exports contributed +1.10% to the headline number, up +0.67% from the prior quarter.
— Contrary to normal form, imports added +0.07% to the headline number, up +0.52% from the prior quarter. In aggregate, foreign trade boosted the headline number by +1.17%.
— The “real final sales of domestic product” growth was revised upward to +5.20%, up a dramatic +3.25% from the prior quarter. This is the BEA’s “bottom line” measurement of the economy and it excludes the inventory data.
— As mentioned above, real per-capita annual disposable was down $9 per year from the previous report. The household savings rate was reported to be unchanged at 6.8%.
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