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GDP: Very Modest Revisions, Strong 4Q17 with More Expected in 1Q18

February 28, 2018
Bottom Line: 4th Quarter GDP was revised down just a touch in the second estimate. Most of the revision was due to lower estimates of farm inventories and software investment within the private business fixed investment category. Consumption remained strong in 4Q, as expected, with only a 0.01% adjustment. With nearly 2/3rds of the 1st Quarter in the books and few revisions to 4Q, markets are looking for another strong quarter in 1Q18 -- Atlanta Fed's GDPNow is at 2.58%, NY Fed is at 3.11% and the consensus from Wall Street is 2.7%.

GDP was REVISED DOWN by 0.1 points to 2.5% in this second estimate of economic activity for Q4-17. This was in line with market expectations for a downward revision to 2.5%.

Economic activity is now 2.5% ABOVE its year ago level and 15.2% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new December data, this revision suggests that the economic activity declined slightly at the end of the quarter.

  • Consumer Spending was revised lower by -0.01% to 3.8%, contributing 2.58% to economic growth.
  • Business Fixed Investment was revised lower by -0.23% to 6.6%, contributing 0.82% to economic growth.
  • Residential Investment was revised higher by 1.41% to 13.1%, contributing 0.47% to economic growth. Inventory Investment was revised slightly lower, contributing -0.70% to economic growth.
  • Net Exports were revised slightly higher with a slight increase/growth in Exports and slight growth in Imports, contributing -1.13% to economic growth.
  • Government Purchases were revised slightly lower but grew modestly for the 9th time in the past 12 quarters, contributing 0.49% to economic growth.

As a result of all of these changes, Real Final Sales was revised slightly higher while Real Domestic Demand was nearly unchanged.

The GDP Price Index was REVISED LOWER by -0.04 points to 2.3%, compared with market expectations for no change at 2.4%. Economy-wide prices are now 1.9% ABOVE their year ago level.