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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."

     
  November 30, 2022 - BEA Revises Third Quarter 2022 GDP Growth Upward to 2.93%:

In their second estimate of the US GDP for the third quarter of 2022, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.93% annual rate, up 0.37 percentage points (pp) from their previous estimate and up 3.51pp from the prior quarter.

Although personal consumption of goods continued to contract, the contraction rate lessened by 0.24pp. That improved consumption was offset by inventories contracting 0.27pp faster than previously reported. Upward revisions to commercial/private fixed investments and governmental spending added 0.26pp to the headline, and foreign trade revisions added another 0.16pp.

The most striking revisions were in household income. In an earlier release, annualized household disposable income was revised $180 lower than in the previous report, and the household savings rate was reported to be 2.8%, down 0.5pp from the previous report. This is the lowest savings rate since the third quarter of 2005, 17 years ago.

Among the notable items in the report :

-- Consumer spending for goods was reported to be contracting at a 0.04% rate, up 0.24pp from the previous estimate and up 0.57pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.22%, down 0.02pp from the previous report and down 0.77pp from the prior quarter. The combined consumer contribution to the headline number was 1.18%, up 0.22pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.74%, up 0.15pp from the previous report and up 0.18pp from the prior quarter.

-- Inventories subtracted 0.97% from the headline number, 0.27pp more than in the previous report but 0.94pp less than 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 upward to 0.53%, up 0.11pp from the previous report and up 0.82pp from the prior quarter.

-- The contribution from exports was revised upward to 1.72%, up 0.09pp from the previous report and up 0.21pp from the prior quarter.

-- Imports added 1.21% annualized 'growth' to the headline number, up 0.07pp from the previous report and up 1.56pp from the prior quarter. Foreign trade contributed a net 2.93pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 3.90%, up 0.64pp from the previous report and up 2.57pp 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 $180 lower than in the previous estimate. The annualized household savings rate was 2.8% (down -0.5pp from the previous report), a 17 year low. In the 57 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.09%.



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) $25.7 = $17.5 + $4.6 + $4.5 + $-.9
% of GDP 100.00% = 68.16% + 17.84% + 17.46% + -3.46%
Contribution to GDP Growth % 2.93% = 1.18% + -1.71% + 0.53% + 2.93%


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

Q3-2022 Q2-2022 Q1-2022 Q4-2021 Q3-2021 Q2-2021 Q1-2021 Q4-2020 Q3-2020 Q2-2020 Q1-2020 Q4-2019
Total GDP Growth 2.93% -0.58% -1.64% 6.94% 2.66% 7.00% 6.30% 3.90% 35.33% -29.87% -4.62% 1.79%
Consumer Goods -0.04% -0.61% -0.02% 0.55% -1.96% 2.65% 5.26% 0.06% 10.85% -2.07% -0.02% 0.57%
Consumer Services 1.22% 1.99% 0.93% 1.58% 3.94% 5.19% 1.71% 2.47% 15.50% -21.01% -4.23% 0.98%
Fixed Investment -0.74% -0.92% 0.83% 0.12% -0.18% 1.05% 1.70% 2.76% 5.12% -5.30% -0.54% -0.24%
Inventories -0.97% -1.91% 0.15% 5.01% 1.96% -0.75% -2.52% 0.30% 7.57% -4.35% -0.35% -1.24%
Government 0.53% -0.29% -0.40% -0.16% -0.02% -0.54% 1.18% -0.01% -0.97% 1.57% 0.57% 0.41%
Exports 1.72% 1.51% -0.53% 2.37% -0.13% 0.51% 0.03% 2.20% 4.98% -8.66% -1.82% 0.13%
Imports 1.21% -0.35% -2.60% -2.53% -0.95% -1.11% -1.06% -3.88% -7.72% 9.95% 1.77% 1.18%
Real Final Sales 3.90% 1.33% -1.79% 1.93% 0.70% 7.75% 8.82% 3.60% 27.76% -25.52% -4.27% 3.03%




Summary and Commentary

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

-- The growth of personal consumption spending (and the offsetting draw down of inventories) is funded by a reduced savings rate, which has now hit a 17 year low.

-- The good news is that fixed investments by private entities and state/local governments remained strong.

Although the upward revision to the headline number is encouraging, it is clear that ongoing consumer spending rates are being funded from savings -- and not from sustainable disposable income.
 
     

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