3Q2020 Gross Domestic Product: Third Estimate

 
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In its third estimate of 3Q2020 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) fine-tuned the growth rate of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +33.44% (+33.1% expected), up 0.38 percentage point (PP) from the second estimate (“3Qv2”) and +64.83PP from 2Q2020.

As noted in prior 3Q reports, two of the four groupings of GDP components -- personal consumption expenditures (PCE) and private domestic investment (PDI) -- contributed to 3Q growth; net exports (NetX) and government consumption expenditures (GCE) detracted.

The headline number’s uptick reflected mostly insignificant changes to line items, which can be summarized as revisions to consumer spending and business investment that were partly offset by a downward revision to exports. The most noteworthy changes included:

* Personal consumption expenditures contributed +25.44% to the headline number vs +25.22% in 3Qv2

* Fixed investment: +5.39% vs +5.23%

* Inventories: +6.57% vs +6.55%

* Exports: +4.89% vs +4.95%

* Imports: -8.10% vs -8.12%

* Government consumption expenditures: -0.75% vs -0.76%

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“The revisions in this report are statistical noise,” wrote Consumer Metrics Institute’s Rick Davis; “[the BEA is] revising a +33% growth by +0.37PP, a one-percent fine tuning of a number that is an artifact of the BEA's methodology of annualizing quarterly changes. As we have mentioned before, the most meaningful way to report this quarter is on a year-over-year basis.

“Given all of the highly visible economic displacements, by the end of 3Q the YoY contractions -- except for consumer services and foreign trade -- have actually been moderate. The YoY numbers tell us that the lingering household spending changes have been highly focused on consumer services, and those reduced expenditures have been channeled into household savings.

“However official this recession may be, it is not being evenly felt. The YoY numbers confirm the glaringly obvious: the people and businesses battered the most economically have been in ‘non-essential’ services. And, as usual, the businesses (and landlords) with the shallowest pockets will suffer the most. Walmart may feel a twinge even as the corner bar and grill dies,” Davis concluded.

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.