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"Bringing the measurements of critical economic activities into the twenty-first century by
mining tracking data for an understanding of what American consumers were doing yesterday."


Monthly Weighted Composite Consumer Leading Indicator for Past 48 Months



Monthly Weighted Composite Consumer Leading Indicator for Past 48 Months


Last 10 Monthly Index Values
Date:05/201906/201907/201908/201909/201910/201911/201912/201901/202002/2020
Value:97.9397.8999.12102.35103.54100.2798.69100.15100.8398.46


Daily Growth Index Past 60 Days


 Daily Growth Index Past 60 Days(1): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (1) The daily values for the Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index over the past 60 days. Please see our Frequently Asked Questions page for a more complete description of our Growth Index.


 


Daily Growth Index -vs- Full GDP Past 48 Months


 Growth Index -vs- Full GDP, Past 4 Years(2): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (2) The Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index -vs- BEA's Quarterly Full GDP Growth Rates over past 4 years. The quarterly GDP growth rates are shown as 3-month plateaus in the graph. The Consumer Metrics Institute's Growth Index is plotted as a monthly average.


 


BEA's "Real" GDP -vs- BPP Deflated "Nominal" GDP, Past 4 Years


 BEA "Real" GDP -vs- BPP Deflated "Nominal" GDP, Past 4 Years(3,4): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (3) In the blue line above the BEA's nominal GDP has been deflated using the inflation rate measured by the Billion Prices Project (BPP) index.
  (4) Note that when deflating the line items in the GDP tables from the BEA it is important to treat the "nominal" import and export data as the effective net "real" data -- since there are no offsetting domestic transactions carrying the correspondingly inflated or deflated prices (i.e., the one-sided net impact of inflating imported commodities is "real" to the economy). The net consequences of inflating import prices may become material in times of substantial and sustained trade imbalances.


 


BEA's "Real" GDP -vs- BLS Deflated Per-Capita GDP, Past 4 Years


 BEA "Real" GDP -vs- BLS Deflated Per-Capita GDP, Past 4 Years(5): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (5) Line items in the BEA's nominal GDP are deflated by either the Bureau of Labor Statistic's (BLS) CPI-U index or the BLS PPI index, and reported on a per-capita basis by using Census Bureau projected mid-quarter population data.


 


BEA's "Real" GDP -vs- BLS Deflated Per-Capita Disposable Income, Past 4 Years


 BEA "Real" GDP -vs- BLS Deflated Per-Capita Disposable Income, Past 4 Years(6): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (6) Line items in the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data.


 


BEA's "Real" GDP -vs- BLS Deflated Per-Capita Proprietors Income, Past 4 Years


 BEA "Real" GDP -vs- BLS Deflated Per-Capita Proprietor Income, Past 4 Years(7): 
 
Chart
(Click here for best resolution)
 
 Notes:
  (7) The Proprietors' income (with inventory valuation and capital consumption adjustments) line from the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data.


 

Commentary


     
  March 26, 2020 - BEA Nudges Fourth Quarter 2019 GDP Growth Upward to 2.12%:

In a mostly meaningless third and final estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.12% annual rate, up 0.03 percentage points (pp) from their previous estimate and up 0.03pp from the prior quarter.

Although this report is purely statistical noise and does not contain any material new information, we nevertheless provide a full analysis of it below. However, unless you are obsessed with statistical noise, we recommend that you skip down to our summary and commentary below the mostly unchanged tables.

Among the items in the report :

-- Consumer spending for goods was reported to be growing at a 0.12% rate, down -0.02pp from the previous estimate and down -0.97pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.12%, up 0.09pp from the previous report and up 0.10pp from the prior quarter. The combined consumer contribution to the headline number was 1.24%, up 0.07pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.09%, unchanged from the previous report and up 0.05pp from the prior quarter.

-- Inventories subtracted -0.98% from the headline number, unchanged from the previous report and down -0.95pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.44%, down -0.02pp from the previous report and up 0.14pp from the prior quarter.

-- The contribution from exports was revised to 0.24%, unchanged from the previous report and up 0.13pp from the prior quarter.

-- Imports added 1.27% annualized 'growth' to the headline number, down -0.02pp from the previous report and up 1.53pp from the prior quarter. Foreign trade contributed a net 1.51pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 3.10%, up 0.03pp from the previous report and up 0.98pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- Real per-capita annualized disposable income was revised -$2 lower than in the previous estimate. The annualized household savings rate was 7.6% (down -0.1pp from the previous report). In the 46 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.48%.

-- For this estimate the BEA assumed an effective annualized deflator of 1.36%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was higher at 2.92%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 0.59%.




The Numbers, As Revised

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $21.7 = $14.8 + $3.7 + $3.8 + $-.6
% of GDP 100.00% = 68.09% + 17.02% + 17.55% + -2.66%
Contribution to GDP Growth % 2.12% = 1.24% + -1.07% + 0.44% + 1.51%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q4-2019 Q3-2019 Q2-2019 Q1-2019 Q4-2018 Q3-2018 Q2-2018 Q1-2018 Q4-2017 Q3-2017 Q2-2017 Q1-2017
Total GDP Growth 2.12% 2.09% 2.01% 3.09% 1.09% 2.92% 3.50% 2.55% 3.55% 3.20% 2.15% 2.30%
Consumer Goods 0.12% 1.09% 1.74% 0.32% 0.33% 0.75% 1.13% 0.27% 1.55% 0.85% 1.14% 0.68%
Consumer Services 1.12% 1.02% 1.29% 0.46% 0.65% 1.59% 1.57% 0.88% 1.57% 0.76% 0.49% 0.95%
Fixed Investment -0.09% -0.14% -0.25% 0.56% 0.46% 0.13% 0.89% 0.94% 1.45% 0.25% 0.48% 1.27%
Inventories -0.98% -0.03% -0.91% 0.53% 0.07% 2.14% -1.20% 0.13% -0.64% 1.00% 0.11% -0.70%
Government 0.44% 0.30% 0.82% 0.50% -0.07% 0.36% 0.44% 0.33% 0.42% -0.02% 0.24% -0.04%
Exports 0.24% 0.11% -0.69% 0.49% 0.18% -0.78% 0.71% 0.10% 1.19% 0.54% 0.20% 0.72%
Imports 1.27% -0.26% 0.01% 0.23% -0.53% -1.27% -0.04% -0.10% -1.99% -0.18% -0.51% -0.58%
Real Final Sales 3.10% 2.12% 2.92% 2.56% 1.02% 0.78% 4.70% 2.42% 4.19% 2.20% 2.04% 3.00%





Summary and Commentary

March 2020 has made this report completely irrelevant. The BEA has metaphorically fine tuned the deck chairs on the Titanic. In a matter of weeks we have transitioned from the above numbers to the reality of unprecedented economic contraction and soaring unemployment rates last seen 90 years ago.

In fairness, the BEA did what it was charged with doing. But even during times of economic stability, the BEA's quarterly ritual of issuing a preliminary growth estimate, followed a month later by a first revision, followed yet a month later by a final estimate, is obscenely antiquated.

As a further indictment of the BEA's methodologies, current "real time" estimates -- using those exact same methodologies -- provide us with annualized growth estimates for the First Quarter of 2020 of 3.1% (GDPNow, Atlanta Fed) and 1.5% (NowCast, New York Fed). If you are a betting person, we would suggest that you take the "under."

Just as the US response to the current pandemic suggests that the FDA, CDC and NIH should be bulldozed and rebuilt from scratch, the time has come for a similar approach to the BEA, which has never been particularly good at reading an economy in transition:

BEA's Official and Changing View of First Quarter 2008 GDP

Reported Growth Rate Report Date Months Lag
+0.6% April 30, 2008 1
+1.0% June 26, 2008 3
-0.7% July 31, 2009 16
-1.8% July 29, 2011 40
-2.7% July 31, 2013 64




That 2008 downturn pales in comparison to the ferocity of an economy being shut down over the course of a couple weeks. The fact that the BEA may finally get the numbers right during the July 2025 revision is of little comfort to policy makers needing guidance now.

Unlike 90 years ago, this economy won't require a decade and a global war for full recovery. But the contraction will certainly spike lower than anything this generation has ever seen.








 
     
     
  February 27, 2020 - BEA Leaves Fourth Quarter 2019 GDP Growth Unchanged At 2.09%:

In their second estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.09% annual rate, up 0.01 percentage points (pp) from their previous estimate and unchanged from the prior quarter.

There were no material changes reflected in this report. The revisions recorded can be regarded as statistical noise. Even the one minor reduction in reported consumer spending on goods was offset by an upward revision to inventories.

Annualized household disposable income was revised -$80 lower than in the previous report, and the household savings rate was reported to be 7.7%, unchanged from the previous report.

For this estimate the BEA assumed an effective annualized deflator of 1.35%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was higher at 2.92%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 0.55%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 0.14% rate, down -0.12pp from the previous estimate and down -0.95pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.03%, up 0.09pp from the previous report and up 0.01pp from the prior quarter. The combined consumer contribution to the headline number was 1.17%, down -0.03pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.09%, down -0.10pp from the previous report and up 0.05pp from the prior quarter.

-- Inventories subtracted -0.98% from the headline number, up 0.11pp from the previous report and down -0.95pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.46%, down -0.01pp from the previous report and up 0.16pp from the prior quarter.

-- The contribution from exports was revised to 0.24%, up 0.07pp from the previous report and up 0.13pp from the prior quarter.

-- Imports added 1.29% annualized 'growth' to the headline number, down -0.03pp from the previous report and up 1.55pp from the prior quarter. Foreign trade contributed a net 1.53pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 3.07%, down -0.10pp from the previous report and up 0.95pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised -$80 lower than in the previous estimate. The annualized household savings rate was 7.7% (unchanged from the previous report). In the 46 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.48%.




The Numbers, As Revised

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $21.7 = $14.8 + $3.7 + $3.8 + $-.6
% of GDP 100.00% = 68.07% + 17.03% + 17.56% + -2.66%
Contribution to GDP Growth % 2.09% = 1.17% + -1.07% + 0.46% + 1.53%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q4-2019 Q3-2019 Q2-2019 Q1-2019 Q4-2018 Q3-2018 Q2-2018 Q1-2018 Q4-2017 Q3-2017 Q2-2017 Q1-2017
Total GDP Growth 2.09% 2.09% 2.01% 3.09% 1.09% 2.92% 3.50% 2.55% 3.55% 3.20% 2.15% 2.30%
Consumer Goods 0.14% 1.09% 1.74% 0.32% 0.33% 0.75% 1.13% 0.27% 1.55% 0.85% 1.14% 0.68%
Consumer Services 1.03% 1.02% 1.29% 0.46% 0.65% 1.59% 1.57% 0.88% 1.57% 0.76% 0.49% 0.95%
Fixed Investment -0.09% -0.14% -0.25% 0.56% 0.46% 0.13% 0.89% 0.94% 1.45% 0.25% 0.48% 1.27%
Inventories -0.98% -0.03% -0.91% 0.53% 0.07% 2.14% -1.20% 0.13% -0.64% 1.00% 0.11% -0.70%
Government 0.46% 0.30% 0.82% 0.50% -0.07% 0.36% 0.44% 0.33% 0.42% -0.02% 0.24% -0.04%
Exports 0.24% 0.11% -0.69% 0.49% 0.18% -0.78% 0.71% 0.10% 1.19% 0.54% 0.20% 0.72%
Imports 1.29% -0.26% 0.01% 0.23% -0.53% -1.27% -0.04% -0.10% -1.99% -0.18% -0.51% -0.58%
Real Final Sales 3.07% 2.12% 2.92% 2.56% 1.02% 0.78% 4.70% 2.42% 4.19% 2.20% 2.04% 3.00%





Summary and Commentary

The key points of this report can be summarized as follows:

-- There were no reported material changes in a report that can be characterized as statistical noise.

-- Both consumer spending and commercial investments are weak.

-- The headline number is boosted by questionable inflationary assumptions and the BEA's logic for dealing with reduced imports (largely from China).

-- The quarter in question was one of high political theater/drama, which can explain a significant amount of the tepid consumer spending.

We probably do not need to note that all of this reporting is for a quarter before the widespread impact of the new corona virus. It could be argued that US economic growth had already topped by the fourth quarter of 2019, making it more vulnerable that usual to any sort of "Black Swan." And a Black Swan is exactly what we now see flying out of China.


 
     
     
  January 30, 2020 - BEA Reports that Fourth Quarter 2019 GDP Grew at a 2.08% Rate:

In their first (preliminary) estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.08% annual rate, down -0.01 percentage points (pp) from the prior quarter.

This is one of the more misleading headline numbers we have ever seen. It simply does not reflect the overall weakness in the data. The key growth of consumer spending was down nearly a full percentage point (-0.91pp) from the prior quarter. Commercial and private fixed investments were stagnant, and inventories were being allowed to contract. The healthy headline number is generated almost entirely from a huge uptick in imports 'growth' and an implausibly low inflation deflator.

Annualized household disposable income was reported to be $111 higher than in the prior quarter, and the household savings rate was reported to be 7.7%, down -0.1pp from the prior quarter.

For this estimate the BEA assumed an effective annualized deflator of 1.50%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was significantly higher at 3.39%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been a minuscule 0.22%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 0.26% rate, down -0.83pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 0.94%, down -0.08pp from the prior quarter. The combined consumer contribution to the headline number was 1.20%, down -0.91pp from the prior quarter.

-- The headline contribution for commercial/private fixed investments was reported to be 0.01%, up 0.15pp from the prior quarter.

-- Inventories subtracted -1.09% from the headline number, down -1.06pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was reported to be 0.47%, up 0.17pp from the prior quarter. That growth was evenly split between Federal and state or local spending.

-- The contribution from exports was reported to be 0.17%, up 0.06pp from the prior quarter.

-- Imports added 1.32% annualized 'growth' to the headline number, up 1.58pp from the prior quarter. Note that in the BEA's calculation matrix the consumption of imports subtracts from domestic production, and 'growth' in this line actually reflects either foreign exchange swings or weakening domestic demand for foreign goods. In aggregate, foreign trade contributed a net 1.49pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was reported to be 3.17%, up 1.05pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was reported to have increased by $111 quarter to quarter. The annualized household savings rate was 7.7% (down -0.1pp from the prior quarter). In the 46 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.50%.




The Numbers

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $21.7 = $14.8 + $3.7 + $3.8 + $-.6
% of GDP 100.00% = 68.09% + 17.00% + 17.57% + -2.66%
Contribution to GDP Growth % 2.08% = 1.20% + -1.08% + 0.47% + 1.49%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q4-2019 Q3-2019 Q2-2019 Q1-2019 Q4-2018 Q3-2018 Q2-2018 Q1-2018 Q4-2017 Q3-2017 Q2-2017 Q1-2017
Total GDP Growth 2.08% 2.09% 2.01% 3.09% 1.09% 2.92% 3.50% 2.55% 3.55% 3.20% 2.15% 2.30%
Consumer Goods 0.26% 1.09% 1.74% 0.32% 0.33% 0.75% 1.13% 0.27% 1.55% 0.85% 1.14% 0.68%
Consumer Services 0.94% 1.02% 1.29% 0.46% 0.65% 1.59% 1.57% 0.88% 1.57% 0.76% 0.49% 0.95%
Fixed Investment 0.01% -0.14% -0.25% 0.56% 0.46% 0.13% 0.89% 0.94% 1.45% 0.25% 0.48% 1.27%
Inventories -1.09% -0.03% -0.91% 0.53% 0.07% 2.14% -1.20% 0.13% -0.64% 1.00% 0.11% -0.70%
Government 0.47% 0.30% 0.82% 0.50% -0.07% 0.36% 0.44% 0.33% 0.42% -0.02% 0.24% -0.04%
Exports 0.17% 0.11% -0.69% 0.49% 0.18% -0.78% 0.71% 0.10% 1.19% 0.54% 0.20% 0.72%
Imports 1.32% -0.26% 0.01% 0.23% -0.53% -1.27% -0.04% -0.10% -1.99% -0.18% -0.51% -0.58%
Real Final Sales 3.17% 2.12% 2.92% 2.56% 1.02% 0.78% 4.70% 2.42% 4.19% 2.20% 2.04% 3.00%





Summary and Commentary

Some people will take the BEA's "bottom line" number from the report (their "Real Final Sales of Domestic Product") at it's very attractive face value of +3.17% growth. If so, they will be seriously misled. Sadly the key points of this report can be summarized as follows:

-- Correcting for inflation using data from the Bureau of Labor Statistics gives us a headline of only +0.22% growth.

-- The headline was supported by a huge swing in imports -- which in the BEA's calculation matrix actually results from weakened (exchange rate adjusted) domestic demand for foreign goods.

-- Inventories can contract for one of two reasons: either companies can't keep up with demand, or they are allowing inventories to contract because of lower demand. Unfortunately, the consumer and commercial spending lines tell us that the latter seems far more plausible.

Neither consumers or fixed investments are driving the headline number. Because of that, the cosmetics of this report are far more glamorous than the reality would suggest.
 
     
     
  December 20, 2019 - BEA Revises Third Quarter 2019 GDP Growth Downward to 2.09%:

In their third and final estimate of the US GDP for the third quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.09% annual rate, down -0.04 percentage points (pp) from their previous estimate but still up 0.08pp from the prior quarter.

Although the headline number changed by only -0.04pp, there were two material shifts in the composition of that number. The growth rate for consumer spending on services was revised upward by +0.22pp to +1.02%, while the growth rate for inventories was revised downward by a nearly offsetting -0.20pp to -0.03%. The only other material adjustment in the report was for the growth rate of consumer spending on goods, which was revised downward by -0.08pp to +1.09%.

Annualized household disposable income was revised $2 higher than in the previous report, and the household savings rate was reported to be 7.8%, down -0.1pp from the previous report.

For this estimate the BEA assumed an effective annualized deflator of 1.72%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was lower at 1.66%. Over estimating inflation results in pessimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 2.18%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 1.09% rate, down -0.08pp from the previous estimate and down -0.65pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.02%, up 0.22pp from the previous report but still down -0.27pp from the prior quarter. The combined consumer contribution to the headline number was 2.11%, up 0.14pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.14%, up 0.04pp from the previous report and up 0.11pp from the prior quarter.

-- Inventories subtracted -0.03% from the headline number, down -0.20pp from the previous report and up 0.88pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.30%, up 0.02pp from the previous report and down -0.52pp from the prior quarter.

-- The contribution from exports remained unchanged at 0.11%, up 0.80pp from the prior quarter.

-- Imports subtracted -0.26% annualized 'growth' from the headline number, down -0.04pp from the previous report and down -0.27pp from the prior quarter. Foreign trade contributed a net -0.15pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 2.12%, up 0.16pp from the previous report and down -0.80pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised $2 higher than in the previous estimate. The annualized household savings rate was 7.8% (down -0.1pp from the previous report). In the 45 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.48%.




The Numbers, As Revised

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $21.5 = $14.7 + $3.7 + $3.8 + $-.7
% of GDP 100.00% = 68.14% + 17.38% + 17.51% + -3.03%
Contribution to GDP Growth % 2.09% = 2.11% + -0.17% + 0.30% + -0.15%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q3-2019 Q2-2019 Q1-2019 Q4-2018 Q3-2018 Q2-2018 Q1-2018 Q4-2017 Q3-2017 Q2-2017 Q1-2017 Q4-2016
Total GDP Growth 2.09% 2.01% 3.09% 1.09% 2.92% 3.50% 2.55% 3.55% 3.20% 2.15% 2.30% 2.04%
Consumer Goods 1.09% 1.74% 0.32% 0.33% 0.75% 1.13% 0.27% 1.55% 0.85% 1.14% 0.68% 0.41%
Consumer Services 1.02% 1.29% 0.46% 0.65% 1.59% 1.57% 0.88% 1.57% 0.76% 0.49% 0.95% 1.29%
Fixed Investment -0.14% -0.25% 0.56% 0.46% 0.13% 0.89% 0.94% 1.45% 0.25% 0.48% 1.27% 0.33%
Inventories -0.03% -0.91% 0.53% 0.07% 2.14% -1.20% 0.13% -0.64% 1.00% 0.11% -0.70% 1.18%
Government 0.30% 0.82% 0.50% -0.07% 0.36% 0.44% 0.33% 0.42% -0.02% 0.24% -0.04% 0.19%
Exports 0.11% -0.69% 0.49% 0.18% -0.78% 0.71% 0.10% 1.19% 0.54% 0.20% 0.72% -0.30%
Imports -0.26% 0.01% 0.23% -0.53% -1.27% -0.04% -0.10% -1.99% -0.18% -0.51% -0.58% -1.06%
Real Final Sales 2.12% 2.92% 2.56% 1.02% 0.78% 4.70% 2.42% 4.19% 2.20% 2.04% 3.00% 0.86%





Summary and Commentary

As might be expected for a second revision, most of this report's changes can be characterized as statistical noise. Our notable observations at this point in time can be summarized as follows:

-- We have had two quarters of roughly +2% growth following a month of 3% growth during the first quarter of 2019. The numbers have not changed materially during the last two quarters, and although we might like slightly higher growth, a steady 2% makes the US economy the envy of most of the developed world.

-- Looking forward, the Fed's forecasting series are of mixed mind. The New York Fed's "Nowcasting" projection for the fourth quarter of 2019 is substantially weaker and well below 1% growth, while the Atlanta Fed's "GDPNow" forecast is actually pointing modestly upward.

-- And the breathlessly reported holiday retail reports are similarly of mixed mind. Not surprisingly it seems to matter which classes of retailers are being sampled -- or perhaps more importantly, which story line or agenda is being promoted.

-- All of which does not address the fact that we have collectively entered a whole new level of political "Fear, Uncertainty and Doubt" ("FUD") -- just as holiday shoppers head out for their final round of hunting and gathering.

In summary, mixed messages are all around us. By selectively choosing among those messages it is possible to build a plausible argument for just about any future economic scenario. In the end we will simply have to wait and see -- and unfortunately the wait is probably until the upcoming quarter is safely in the rear-view mirror.
 
     
     
  November 27, 2019 - BEA Revises Third Quarter 2019 GDP Growth Upward to 2.13%:

In their second estimate of the US GDP for the third quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.13% annual rate, up 0.20 percentage points (pp) from their previous estimate and up 0.12pp from the prior quarter.

This report contained no material new information about the economy. All of the increased headline growth came from a revision to the previously reported inventory number, which was revised from a slight contraction (-0.05% growth rate) to mild growth (+0.17% growth rate), adding 0.22pp to the headline. None of the other line items impacted the headline number by more than 0.07pp.

Annualized household disposable income was revised $-102 lower than in the previous report, and the household savings rate was reported to be 7.9%, down -0.2pp from the previous report.

For this estimate the BEA assumed an effective annualized deflator of 1.67%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was effectively the same at 1.66%. Slightly over estimating inflation results in slightly pessimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been marginally higher at 2.18%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 1.17% rate, up 0.03pp from the previous estimate and but still down -0.57pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 0.80%, up 0.01pp from the previous report and down -0.49pp from the prior quarter. The combined consumer contribution to the headline number was 1.97%, up 0.04pp from the previous report but still down a material -1.06pp from the prior quarter.

-- The headline contribution for commercial/private fixed investments was revised to -0.18%, up 0.04pp from the previous report and up 0.07pp from the prior quarter.

-- Inventories added 0.17% to the headline number, up 0.22pp from the previous report and, more importantly, up 1.08pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.28%, down -0.07pp from the previous report and down -0.54pp from the prior quarter.

-- The contribution from exports was revised to 0.11%, up 0.02pp from the previous report and up 0.80pp from the prior quarter.

-- Imports subtracted -0.22% annualized 'growth' from the headline number, down -0.05pp from the previous report and down -0.23pp from the prior quarter. Foreign trade contributed a net -0.11pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 1.96%, down -0.02pp from the previous report and down -0.96pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised $-102 lower than in the previous estimate. The annualized household savings rate was 7.9% (down -0.2pp from the previous report). In the 45 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.48%.




The Numbers, As Revised

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

GDP Components Table

Total GDP = C + I + G + (X-M)
Annual $ (trillions) $21.5 = $14.7 + $3.8 + $3.8 + $-.7
% of GDP 100.00% = 68.10% + 17.42% + 17.51% + -3.03%
Contribution to GDP Growth % 2.13% = 1.97% + -0.01% + 0.28% + -0.11%


The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Quarterly Changes in % Contributions to GDP

Q3-2019 Q2-2019 Q1-2019 Q4-2018 Q3-2018 Q2-2018 Q1-2018 Q4-2017 Q3-2017 Q2-2017 Q1-2017 Q4-2016
Total GDP Growth 2.13% 2.01% 3.09% 1.09% 2.92% 3.50% 2.55% 3.55% 3.20% 2.15% 2.30% 2.04%
Consumer Goods 1.17% 1.74% 0.32% 0.33% 0.75% 1.13% 0.27% 1.55% 0.85% 1.14% 0.68% 0.41%
Consumer Services 0.80% 1.29% 0.46% 0.65% 1.59% 1.57% 0.88% 1.57% 0.76% 0.49% 0.95% 1.29%
Fixed Investment -0.18% -0.25% 0.56% 0.46% 0.13% 0.89% 0.94% 1.45% 0.25% 0.48% 1.27% 0.33%
Inventories 0.17% -0.91% 0.53% 0.07% 2.14% -1.20% 0.13% -0.64% 1.00% 0.11% -0.70% 1.18%
Government 0.28% 0.82% 0.50% -0.07% 0.36% 0.44% 0.33% 0.42% -0.02% 0.24% -0.04% 0.19%
Exports 0.11% -0.69% 0.49% 0.18% -0.78% 0.71% 0.10% 1.19% 0.54% 0.20% 0.72% -0.30%
Imports -0.22% 0.01% 0.23% -0.53% -1.27% -0.04% -0.10% -1.99% -0.18% -0.51% -0.58% -1.06%
Real Final Sales 1.96% 2.92% 2.56% 1.02% 0.78% 4.70% 2.42% 4.19% 2.20% 2.04% 3.00% 0.86%





Summary and Commentary

Except for the inventory number, most of this report's changes can be characterized as statistical noise. The take-aways from the report can be summarized as follows:

-- The improved headline growth came from growing inventories. That is not a good economic signal in and of itself, and it does not reflect improved domestic consumption.

-- The material drop from the prior quarter's greater than +3% growth in consumer spending for goods and services was confirmed.

Last month we mentioned that "Fear, Uncertainty and Doubt" ("FUD") can be as much of a factor in consumer spending rates as horrendous weather. Let's hope that consumer holiday spending largely ignores the ongoing political storms in Washington.
 
     


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