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GDP:  Q3 Steady at 3.5% But Business Fixed Investment Revised Higher

November 28, 2018
Bottom Line: The second estimate of economic activity for the 3rd Quarter was unchanged at 3.5%. However, there were significant downward revisions to consumption (previously 4%, now 3.6%) and sharply higher revisions to business fixed investment (previously 0.8%, now 2.5%). Slower business fixed investment growth had been something several Fed speakers expressed concern about. The drag from trade, a give-back from 2nd Quarter, remained significant. Overall this report suggests steady growth late in the 3rd Quarter and likely means the 4th Quarter is tracking in-line with current forecasts of 2.5% for the 4th Quarter.

GDP was unchanged at 3.5% in this second estimate of economic activity for Q3-18. This was in line with market expectations for no change revision to 3.5%.

Economic activity is now 3.0% ABOVE its year ago level and 24.5% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new September data, this revision suggests that the economic activity was little changed at the end of the quarter.

Consumer Spending was revised lower by -0.36% to 3.6%, contributing 2.45% to economic growth.

Business Fixed Investment was revised higher by 1.69% to 2.5%, contributing 0.35% to economic growth. Residential Investment was revised higher by 1.40% to -2.6%, contributing -0.10% to economic growth. Inventory Investment was revised moderately higher, contributing 2.27% to economic growth.

Net Exports were revised moderately lower with a modest decline in Exports and slight growth in Imports, contributing -1.91% to economic growth.

Government Purchases were revised slightly lower but grew modestly for the 9th time in the past 12 quarters, contributing 0.44% to economic growth.

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

The GDP Price Index was REVISED UP by 0.06 points to 1.7%, compared with market expectations of 1.7%. Economy-wide prices are now 2.3% ABOVE its year ago level.