August 30, 2017

2Q17 Gross Domestic Product Revised up to an Annualized 3.0 Percent from 2.6 Pct. (vs. Consensus Expectations of 2.7 Pct.

Filed under: Economy,Taxes & Government — Tom @ 9:49 am

From the Bureau of Economic Analysis (full text release with tables):

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2017 (table 1), according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.6 percent. With this second estimate for the second quarter, the general picture of economic growth remains the same; increases in personal consumption expenditures (PCE) and in nonresidential fixed investment were larger than previously estimated. These increases were partly offset by a larger decrease in state and local government spending.

… The increase in real GDP in the second quarter reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, and private inventory investment that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the second quarter primarily reflected upturns in private inventory investment and federal government spending and an acceleration in PCE that were partly offset by downturns in residential fixed investment and state and local government spending and a deceleration in exports.

My comparative table will go up shortly.

UPDATE: Here it is —

GDPcomponentsThru2Q17at083017

Concerning the highlighted areas above:

  • The increased personal spending on goods was very helpful, and seems in sync with the increases in industrial production and employment.
  • The reduction in health care spending accompanied by the “other services” increases likely reflects the idea that consumers are tapped out in being able to spend their own money on health care, and are getting socked hard by Obamacare- and employer plan-driven increases.
  • The improvement in fixed nonresidential investment was nice, but needs to get even better in next month’s revision and future quarters.
  • State and local governments are finally running into a spending wall  and (many years too late) being forced to deal with it. As this plays out in mostly-blue states, it won’t be pretty.

After last month’s initial release, I noted the following:

It may be that the next two revisions will be positive, given that recent information on durable goods and the recent pattern of upward revisions to previous months’ retail sales data.

I can’t speak to durable goods, but there have been significant (and, I would argue, possibly suspicious) upward revisions to May’s and June’s retail sales (May, from an original -0.3 percent to a current 0.0 percent; June, from an original -0.2 percent to a current +0.3 percent).

These revisions may seem minor, but they have a big-dollar impact on reported GDP, as seen in the increase spending on goods seen above, which, along with fixed investment, was the main influence driving the upward revision to GDP.

OVERALL: Today’s annualized 3.0 percent is the highest quarterly result since 1Q15, and was exceeded during the Obama administration only 8 times in 32 quarters. Today’s upward result is okay, and beats the alternative, but it’s not a cause for excessive celebration (and it’s a relief that President Tweet, er, Trump, is not excessively celebrating — at least not yet).

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1 Comment

  1. This modest GDP rate is a result of Trump removing SOME of the onerous regulations imposed by Obama, further expansion of the economy will occur as Congress stops cowering to liberals when they gut the rest of laws like ObamaCare and Dodd-Frank.

    IMO, no fiscal stimulus is needed by the US government to see a 3% annual GDP growth rate. In fact, as more people are moved off the government dole, GDP will naturally advance even further with their added productivity as wage earners.

    The bottom line here is that government can move the economy by NOT interfering versus the failed economics of pump priming.

    Comment by dscott — August 30, 2017 @ 11:59 am

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