3Q2022 Gross Domestic Product: Second Estimate

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In its second estimate of 3Q2022 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +2.93% (+2.7% expected), up 0.36 percentage point (PP) from the “advance” estimate (“3Qv1”) and +3.51PP from 2Q2022.

As with 3Qv1, three groupings of GDP components -- personal consumption expenditures (PCE), net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the headline. That combination was partially offset by private domestic investment (PDI).

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As for details (all relative to 3Qv1):

PCE. Consumer spending was revised up by $10.9 billion (chained 2012-dollar basis). Spending on goods was revised higher (+$13.7B), led by nondurable goods (+$10.7B). Services spending was revised down (-$1.2B), led by receipts from sales of goods and services by nonprofit institutions (-$10.8B); upward revisions to health care (+$11.4B) nearly offset the other positive revisions in services.

PDI. Downward revisions to private nonfarm inventories (-$12.3B) dominated this category. Notable upward revisions to fixed investment occurred in nonresidential structures (+$10.2B) and software (+$9.3B).

NetX. Upward revisions to goods (+$2.3B) and services (+$2.6B) exports combined with downward revisions to goods (-$3.0B) and services (-$1.2B) imports to push net exports higher.

GCE. The state and local subcategory (+$5.6B) dominated this line item, led by gross investment (+$4.2B).

The BEA’s real final sales of domestic product -- which ignores inventories -- was revised to +3.90% (+0.63PP from 3Qv1), a level 2.57PP above the 2Q estimate. 

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Consumer Metric Institute’s Rick Davis provided key takeaways of the report:

-- The growth of personal consumption spending (and the offsetting drawdown of inventories) is funded by a reduced savings rate, which has now hit a 17-year low.

-- The good news is that fixed investments by private entities and state/local governments remained strong.

“Although the upward revision to the headline number is encouraging,” Davis wrote, “it is clear that ongoing consumer spending rates are being funded from savings -- and not from sustainable disposable income.”

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.