September 29, 2018

2Q18 GDP, Third Release (092718): An Annualized 4.2 Percent, Unchanged From Previous Release

Filed under: Economy,Taxes & Government — Tom @ 9:05 am

Thursday morning, the government’s third release on second quarter GDP came in unchanged:

Real gross domestic product (GDP) increased at an annual rate of 4.2 percent in the second quarter of 2018, according to the “third” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was also 4.2 percent. With this third estimate for the second quarter, the general picture of economic growth remains the same; a downward revision to private inventory investment was offset by small upward revisions to most other GDP components. Imports which are a subtraction in the calculation of GDP, were revised down slightly.

Real gross domestic income (GDI) increased 1.6 percent in the second quarter, compared with an increase of 3.9 percent in the first quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.9 percent in the second quarter, compared with an increase of 3.1 percent in the first quarter.

The increase in real GDP in the second quarter reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment and residential fixed
investment. Imports decreased.

The acceleration in real GDP growth in the second quarter reflected accelerations in PCE, exports, federal government spending, and state and local government spending, as well as a smaller decrease in residential fixed investment. These movements were partly offset by a downturn in private inventory investment and a deceleration in nonresidential fixed investment. Imports decreased after increasing in the first quarter.

Current-dollar GDP increased 7.6 percent, or $370.9 billion, in the second quarter to a level of $20.41 trillion. In the first quarter, current-dollar GDP increased 4.3 percent, or $209.2 billion.

The price index for gross domestic purchases increased 2.4 percent in the second quarter, compared with an increase of 2.5 percent in the first quarter (table 4). The PCE price index increased 2.0 percent, compared with an increase of 2.5 percent. Excluding food and energy prices, the PCE price index increased 2.1 percent, compared with an increase of 2.2 percent.

Updates to GDP

The percent change in real GDP was unrevised from the second estimate, reflecting a downward revision to private inventory investment that was offset by upward revisions to state and local government spending, PCE, nonresidential fixed investment, exports, and residential fixed investment. Imports were revised down slightly (actually, they weren’t, as seen below — Ed.)

Here’s how it shook out in detail:

GDPcomponentsThru2Q18at092718

The big revision was to private inventories. Slightly positive moves in every other category kept the quarter’s “final” figure (pending comprehensive annual revisions every July) where it was (rounded) a month ago. The fixed nonresidential component was among them, and its combined 2.62-point contribution during the past two quarters is the best performance since the final two quarter of 2011.

The press and the left are still falsely contending that they set the stage for the current economy. The government’s graph of quarterly performance makes a mockery of that claim:

QtrlyGDPgraphBEAto2Q18

Annualized GDP growth averaged barely 1.5 percent during the second quarters ending in 1Q17. That’s not momentum; it’s barely treading water.

As seen at this graph at the St. Louis Fed, real per capita GDP was $54,201 in 2Q15. By 1Q17, it had only increased to $54,945. The annualized increase during that period was only 0.78 percent.

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