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mining tracking data for an understanding of what American consumers were doing yesterday."

     
  December 22, 2022 - BEA Revises Third Quarter 2022 GDP Growth Upward to 3.25%:

In their third and final 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 +3.25% annual rate, up 0.32 percentage points (pp) from their previous estimate and up 3.83pp from the prior quarter.

The upward revision to the headline number came from several sources: consumer spending on services increased 0.41pp, commercial/private fixed investments added 0.12pp, and governmental spending increased another 0.12pp. Larger inventory draw-downs subtracted 0.22pp more than in the previous report, while other line item revisions were not material.

In an earlier release, annualized household disposable income was revised $10 higher than in the previous report, and the household savings rate was reported to be 2.7%, down 0.1pp from the previous report.

Federal agencies have had problems agreeing on their measures of inflation for the quarter. For this estimate the BEA assumed an effective annualized deflator of 4.36%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was significantly lower at 1.96%. 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 5.80%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be contracting at a -0.08% rate, down -0.04pp from the previous estimate and up 0.53pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.63%, up 0.41pp from the previous report and down -0.36pp from the prior quarter. The combined consumer contribution to the headline number was 1.55%, up 0.37pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.62%, up 0.12pp from the previous report and up 0.30pp from the prior quarter.

-- Inventories subtracted -1.19% from the headline number, down 0.22pp from the previous report and up 0.72pp 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 0.65%, up 0.12pp from the previous report and up 0.94pp from the prior quarter.

-- The contribution from exports was revised to 1.65%, down 0.07pp from the previous report and up 0.14pp from the prior quarter.

-- Imports added 1.21% annualized 'growth' to the headline number, unchanged from the previous report and up 1.56pp from the prior quarter. Foreign trade contributed a net 2.86pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 4.44%, up 0.54pp from the previous report and up 3.11pp 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 $10 higher than in the previous estimate. The annualized household savings rate was 2.7% (down 0.1pp from the previous report). 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% = 68.20% + 17.80% + 17.47% + -3.46%
Contribution to GDP Growth % 3.25% = 1.55% + -1.81% + 0.65% + 2.86%


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 3.25% -0.58% -1.64% 6.94% 2.66% 7.00% 6.30% 3.90% 35.33% -29.87% -4.62% 1.79%
Consumer Goods -0.08% -0.61% -0.02% 0.55% -1.96% 2.65% 5.26% 0.06% 10.85% -2.07% -0.02% 0.57%
Consumer Services 1.63% 1.99% 0.93% 1.58% 3.94% 5.19% 1.71% 2.47% 15.50% -21.01% -4.23% 0.98%
Fixed Investment -0.62% -0.92% 0.83% 0.12% -0.18% 1.05% 1.70% 2.76% 5.12% -5.30% -0.54% -0.24%
Inventories -1.19% -1.91% 0.15% 5.01% 1.96% -0.75% -2.52% 0.30% 7.57% -4.35% -0.35% -1.24%
Government 0.65% -0.29% -0.40% -0.16% -0.02% -0.54% 1.18% -0.01% -0.97% 1.57% 0.57% 0.41%
Exports 1.65% 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 4.44% 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:

-- As a stand-alone quarter, Q3-2022 seems to be showing comfortable growth. Normally, we should be very pleased.

-- That said, wildly different measurements of quarterly inflation make any estimates of "real" growth extremely difficult.

In short, the optimism that can be drawn from this report should be, at best, somewhat guarded.

Please note that starting in January 2023 we will be providing our GDP reporting analysis only once each quarter, upon the release of the BEA's initial (preliminary) report for each quarter (i.e., in January, April, July and October).
 
     

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