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In
its third estimate of 2Q2018 gross domestic product (GDP), the Bureau
of Economic Analysis (BEA) pared the growth rate of the U.S. economy to a
seasonally adjusted and annualized rate (SAAR) of +4.16% (+4.3% expected),
down 0.07 percentage point (PP) from the second estimate (“2Qv2”) but +1.94PP from
1Q2018.
Three
of the four groupings of GDP components -- personal consumption expenditures
(PCE), net exports (NetX), and government consumption expenditures (GCE) -- contributed
to 2Q growth; private domestic investment (PDI) detracted slightly from it.
Overall,
the 2Qv3 revisions were negligible. The growth rate for consumer spending for goods
was revised upward by 0.04PP, but a 0.01PP decline in spending on services. The
contraction rate for inventories worsened (-0.20PP) to -1.17%, while the growth
rate in commercial fixed investment rose by 0.03PP to +1.10%. The growth rate
for exports rose 0.02PP to +1.12%; imports: +0.03PP to +0.10%. Finally, state
and local government consumption expenditures were revised up (+0.03PP) to +0.20%.
Real
final sales of domestic product (which exclude inventories) were again revised higher
(+0.13PP from 2Qv2, to +5.33%), 3.38PP above the 1Q2018 estimate.
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“All
of the revisions in this report can be characterized as statistical noise.
Nonetheless, a headline number with +4.16% growth is very good, confirming that
the stimulus expected from the Tax Cuts and Jobs Act of 2017 has materialized,”
remarked Consumer Metric Institute’s Rick Davis.
“As we have mentioned before, this kind of growth signals that the Fed's
accommodations over the past decade are certainly no longer needed. And if the
growth persists in this range for another quarter or two, significant
tightening might be warranted to prevent the economy (and wage-price inflation)
from overheating.
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.
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