Click image
for larger version
In
its third estimate of 1Q2017 gross domestic product (GDP), the Bureau
of Economic Analysis (BEA) boosted the growth rate of the U.S. economy to a
seasonally adjusted and annualized rate (SAAR) of +1.42% (above consensus expectations
of 1.2%); that is up by +0.26 percentage point (PP) from the previous 1Q2017 estimate,
but still roughly two-thirds (-0.66 PP) 4Q2016’s +2.08%.
Although
the latest SAAR was 0.26 PP higher than the second estimate, nominal (i.e., not
inflation adjusted) GDP was actually $500 million lower than previously reported
at the end of May. The BEA achieved its higher growth estimate by applying a
lower GDP deflator (3rd est: +1.94%) than the one used in May’s
report (2nd est: +2.21%).
Three
of the four groupings of GDP components -- personal consumption expenditures
(PCE), private domestic investment (PDI), and net exports (NetX) -- contributed
to 1Q growth. Government consumption expenditures (GCE) detracted from it.
Notable details follow:
*
PCE: Upwardly revised expenditures for health care (including insurance) and
housing utilities elevated PCE’s contribution to 1Q’s headline number in this
revision.
*
PDI: Downward revisions to nearly-stalled inventory growth overwhelmed
improvements in fixed investment (especially nonresidential construction).
*
NetX: Exports were revised higher while imports provided less of a drag on 1Q’s
headline.
*
GCE: Government spending contracted despite upwardly revised state and local outlays.
Click image for
larger version
The
notable takeaways from this report include:
--
The largest upward revision was in consumer spending for healthcare and
insurance.
--
The growth rate for consumer spending on goods remains anemic.
--
The inventory contraction worsened, possibly in anticipation of softer future
consumer spending.
--
Foreign trade remained a bright spot and is not a drag on the headline number.
“The
US consumer may be spending more, but that increased spending is not on discretionary
‘life-style’ goods,” concluded Consumer Metric Institute’s Rick Davis,
“And as per usual, the Fed is once again projecting a return to ‘normalcy’ in
the form of 3% growth in future quarters -- with consumer spending leading the
way. But if this past quarter's pattern persists those consumers may continue
to face a toxic mix of stagnant disposable income, rising insurance costs and
shrinking savings -- not exactly a formula for happy campers.”
The foregoing comments represent the
general economic views and analysis of Delphi Advisors, and are provided solely
for the purpose of information, instruction and discourse. They do not
constitute a solicitation or recommendation regarding any investment.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.