February 28, 2018

4Q17 GDP, 2nd Reading (022818): An Annualized 2.5 Percent, Down From 2.6 Percent

Filed under: Economy,Taxes & Government — Tom @ 7:19 am

Related data points (relevant to fourth quarter):

  • New home sales in December were revised up by about 3 percent (currently 643,000 seasonally adjusted, was 625K a month ago). The latest release revised November by 9K to 698K. The bigger picture, as of now, is that seasonally adjusted fourth-quarter sales were almost 11 percent higher than 3Q and 15 percent higher than 4Q16. The not seasonally adjusted year-over-year difference was about the same, while fourth quarter raw sale were the same in the fourth quarter as the third, which almost never happens (typically, there are big declines). Those are strong performances. Residential fixed investment contributed 0.42 points to GDP in the first reading based on an 11.6 percent increase from the third quarter. I don’t see that contribution to GDP going down, and it may go up.
  • At the opening point of the home construction pipeline, 4Q17 housing starts were up by an impressive 6.4 percent over 3Q17.
  • Meanwhile, the news in the manufacturing sector has been strong. 4Q17 durable goods orders were 7.3 percent and 4.0 percent higher than 4Q16 and 3Q17, respectively; the latter increase annualizes to almost 17 percent. Comparable TOTAL manufacturing orders were 7.0 percent and 3.6 percent higher, with the latter annualizing to over 15 percent. The durables results would seem to foreshadow stronger GDP contributions than the 1.02 points (14.0 percent increase over third quarter) seen in the original release. If not, the strength in orders should translate into strength in the first quarter.
  • Retail sales increases aren’t as strong (up 5.0 percent 4Q17 vs. 4Q16, and 2.3 percent 4Q17 vs. 3Q17) , but it seems that the latter figure should be translating into a bigger GDP contribution than originally reported.
  • All of that said, the trade data has been more of a drag than anticipated.


  • On Sunday, the Associated Press predicted that the initial 2.6 percent reading reported last month wouldn’t change.
  • On Tuesday, Seeking Alpha predicted 2.5 percent.

The report will be here at 8:30.

10:00 A.M. (sorry for delay, fighting fatigue and illness) HERE IT IS (full release with tables)—

Real gross domestic product (GDP) increased at an annual rate of 2.5 percent in the fourth quarter of 2017, according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.2 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 fourth quarter, the general picture of economic growth remains the same.

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

The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment that was partly offset by accelerations in PCE, exports, state and local government spending, nonresidential fixed investment, and federal government spending, and an upturn in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, turned up.

Current-dollar GDP increased 4.9 percent, or $235.9 billion, in the fourth quarter to a level of $19,736.5 billion. In the third quarter, current-dollar GDP increased 5.3 percent, or $250.6 billion.

The price index for gross domestic purchases increased 2.5 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter. The PCE price index increased 2.7 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.9 percent, compared with an increase of 1.3 percent.

The 2.5 deflator seems higher than it should be. More in a moment.

UPDATE: Here is the components breakdown:


Except for a 0.15-point flip between goods and services in Personal Consumption Expenditures, there’s no noteworthy movement in today’s report. Recent news about upticks in inventories probably foreshadow a pretty positive number for that line item in first quarter. Recent GDP forecasts for the first quarter are in the 2.5 percent to 3 percent range.


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