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GDP: Q3 Revised Higher, More Than Expected

November 29, 2017

Bottom Line: Economic activity expanded more than previously estimated in the 3rd Quarter. Positive revisions were across net exports, residential investment, business fixed investment, and government purchases, while , consumption was revised slightly lower. The data indicates that 2017 Q4 GDP is tracking in line with the consensus estimate of 2.7%. While the revisions were mostly due to data collected late in the quarter, suggesting the quarter ended on a strong note, most of the revisions were in volatile categories. Thus, this report should do little to change consensus estimates of 2.7% for 4th Quarter GDP.

GDP was REVISED UP by 0.3 points to 3.3% in this second estimate of economic activity for Q3-17. This was in line with market expectations for an upward revision to 3.2%.

Economic activity is now 2.3% ABOVE its year ago level and 14.5% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new September data, this revision suggests that the economic activity increased modestly at the end of the quarter.

Consumer Spending was revised lower by -0.03% to 2.3%, contributing 1.60% to economic growth. Business Fixed Investment was revised higher by 0.84% to 4.7%, contributing 0.59% to economic growth. Residential Investment was revised higher by 0.90% to -5.1%, contributing -0.20% to economic growth. Inventory Investment was revised slightly higher, contributing 0.80% to economic growth.

Net Exports were revised modestly higher with a slight decline in Exports and slight decline in Imports, contributing 0.43% to economic growth. Government Purchases were revised slightly higher but grew slightly for the 8th time in the past 12 quarters, contributing 0.07% to economic growth.

As a result of all of these changes, Real Final Sales was revised modestly higher while Real Domestic Demand was revised modestly higher. The GDP Price Index was REVISED LOWER by -0.03 points to 2.1%, compared with market expectations for no change at 2.2%. Economy-wide prices are now 1.8% ABOVE its year ago level.

Article by Contingent Macro Advisors