3Q2022 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 3Q2022 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +2.57% (+2.3% expected), up 3.15 percentage points (PP) from 2Q2022’s -0.58%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 3Q2022 was 1.77% higher than in 3Q2021; that growth rate was marginally slower (-0.02PP) than 2Q2022’s +1.80% relative to 2Q2021.

Three groupings of GDP components -- personal consumption expenditures (PCE), net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the 3Q headline. That combination was partially offset by private domestic investment (PDI). 

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As for details (all comparisons to 2Q2022) --

PCE:

* Goods. Spending on non-durable goods fell (-$11.4 billion, chained 2012 dollars), led by food and beverages (-$10.1B). Spending on durable goods also slipped (-$4.8B), dominated by motor vehicles and parts (-$17.8B) and.

* Services. Gains (+$60.2B) were broad-based, led by health care (+$16.6B) and other services (+$16.2B).

PDI:

* Fixed investment. This decline (-$45.0B) was led by residential investment (-$49.5B), and partially offset by expenditures on nonresidential equipment (+$32.6B).

* Inventories. Nonfarm inventories shrank by $44.9B; farm: +$3.4B.

NetX:

* Exports. Goods exports rose by $73.7B; services: +$14.4B.

* Imports. Goods imports fell $77.0B; services: +$3.3B. Recall that imports are inversely related to the GDP headline.

GCE: Federal national defense (+$8.9B) led this line item, followed by state and local consumption expenditures (+$5.9B)

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +3.27% (up 1.94PP from 2Q).

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Consumer Metric Institute’s Rick Davis summarized the key points of this report as follows:

-- This report benefited greatly from the likely temporary pause in inflationary pressure, primarily energy related.

-- The headline number masks the reality of consumer spending and the state of household finances. Households are still hurting, as evidenced by the low savings rate, and consumer spending is increasing at less than a 1% rate.

-- Fixed investment spending remains in contraction.

-- Through the magic of the BEA's arithmetic, imports added 1.14% annualized “growth” to the headline domestic product number.

-- As usual, Federal spending spiked in the last quarter of the fiscal year.

“Cynics will not be surprised that the headline number released just days before the mid-term elections shows moderate growth,” Davis concluded. “Nonetheless, the reality is that household finances remain very tight.”

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.