1Q2024 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 1Q2024 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +1.59% (+2.3% expected), down 1.80 percentage points (PP) from 4Q2023’s +3.39%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 1Q2024 was 2.97% higher than in 4Q2023; that growth rate was slower (-0.17PP) than 4Q2023’s +3.13% relative to 4Q2022.

Three groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- contributed positively to the 1Q percent-change headline; net exports (NetX) detracted from it.

“The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment,” the BEA reported. “Imports, which are a subtraction in the calculation of GDP, increased.”

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As for details (all values are billions of chained 2017 dollars; all comparisons to 4Q2023) --

PCE (+96.8):

• Goods (-5.8). Spending on durable goods fell (-6.3) led by motor vehicles and parts (-13.9). Growth in spending on nondurable goods was absent (0.0), as a drop in gasoline and other energy goods (-9.2) was offset by other line items.
• Services (+99.5). Gains were led by health care (+35.9) and financial services and insurance (+20.2).

PDI (+32.3):

• Fixed investment (+52.3). This increase was led by residential investment (+24.6), with nonresidential investment close behind (+23.7) -- particularly software (+20.2) and information processing equipment (+14.2). Transportation equipment showed the largest loss (-18.5).
• Inventories (-19.5). Nonfarm inventories contracted (-18.8); farm: -0.7.

NetX (-54.7):

• Exports (+5.8). Goods exports rose by 3.7; services: +2.0.
• Imports (+60.4). Goods imports increased by 47.1; services: +13.0. Recall that the net change in imports is inversely related to the change in the GDP headline.

GCE (+11.5): State and local consumption expenditures (+10.2) led this category. Federal expenditures declined (-0.9) but this ignores outlays via transfer payments.

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +1.94% (down 1.92PP from 4Q).

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Despite the slowdown, “the economy was on solid ground,” wrote MarketWatch’s Jeffry Bartash. “Consumer spending, the main engine of the growth, rose at a healthy 2.5% clip to lead the way. Business spending was also stronger than expected.

“What’s more, there’s little evidence the economy is headed for tougher times. While early data for April have been somewhat soft, very few economists think a recession is likely.” If his forecast proves true, it will be primarily attributable to 2024 being an election year.

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.

February 2024 International Trade (Softwood Lumber)

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With February exports of goods and services at $263.0 billion (+2.3% MoM; +4.1% YoY) and imports at $331.9 billion (+2.2% MoM; +2.8% YoY), the net trade deficit was $68.9 billion (+1.9% MoM; -1.7% YoY). 

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Softwood lumber exports rose (10 MMBF or +10.2%) in February, along with imports (99 MMBF or +8.9%). Exports were 14 MMBF (+14.3%) above year-earlier levels; imports: 127 MMBF (+11.6%) higher. As a result, the year-over-year (YoY) net export deficit was 113 MMBF (+11.4%) higher. Also, the average net export deficit for the 12 months ending February 2024 was 7.5% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (56.9% of total softwood lumber exports -- of which Mexico: 36.7%; Canada: 20.2%), Asia (15.1% -- especially India: 3.5%; Japan: 2.2%; China: 4.0%), and the Caribbean (21.0% -- especially the Dominican Republic: 10.7%; Bahamas: 2.1%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 9.9% lower than the same month(s) of the prior year. Meanwhile, Canada was the source of most (83.4%) softwood lumber imports into the United States. Imports from Canada were 8.6% higher YTD/YTD. Overall, YTD exports were up 7.9% compared to the prior year; imports: +0.4%.

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U.S. softwood lumber export activity through the Gulf customs region represented 40.2% of the U.S. total; West Coast: 28.2%, and Eastern: 22.0%. Mobile (18.8% of the U.S. total), San Diego (14.9%) Seattle (12.0%), and Laredo (15.7%) were the most active districts. At the same time, the Great Lakes customs region handled 57.1% of softwood lumber imports -- most notably the Duluth, MN district (16.9%) -- coming into the United States. 

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Southern yellow pine comprised 30.7% of all softwood lumber exports; other pine (12.1%), Douglas-fir (12.9%), treated lumber (12.1%), and finger-jointed (9.7%) were also significant.

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.

4Q2023 Gross Domestic Product: Third Estimate

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In its third estimate of 4Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) boosted the headline growth rate of the U.S. economy to above both prior estimates -- i.e., a seasonally adjusted and annualized rate (SAAR) of +3.40% (+3.2% expected), up 0.17 percentage point (PP) from the second estimate (“4Qv2”) but -1.48PP from 3Q2023.

As can be seen in the right-hand graph above, the underlying components have shifted around quite noticeably over time. Although all four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- have consistently contributed positively to the headline, the contributions of PDI and NetX have diminished.

“The increase in real GDP [in the 4Qv3 revision] primarily reflected increases in consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment that were partly offset by a decrease in private inventory investment,” the BEA reported. “Imports, which are a subtraction in the calculation of GDP, increased.”

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As for details (billions of chained 2017 dollars; all relative to 4Qv2) --

PCE (+11.8):

* Goods (-3.4). Spending on durable goods edged up (+0.2), led by motor vehicles and parts (+0.7) and recreational goods and vehicles (+0.4) but largely offset by furnishings and durable household equipment (-0.8). Also, nondurable goods fell (-3.4), led by food and beverages for off-premises consumption (-2.0) and other nondurable goods (-1.3).

* Services (+14.5). A jump in health care costs (+11.1) dominated this category.

PDI (-1.1):

* Fixed investment (+10.2). Gains in nonresidential investment (+11.2) were spread among structures (+4.9), equipment (+2.0), and intellectual property products (+3.5). Residential fixed investment was revised by -0.1.

* Inventories (-11.4). Nonfarm inventories (-11.5) led the drop in this category.

NetX (-3.6):

* Exports (-8.0). Services (-13.3) led the downward revision in this category.

* Imports (-4.3). Here, too, services (-4.0) dominated. Because imports are a subtraction in the calculation of GDP, the downward revision tempered 4Q’s NetX decline.

GCE (+3.7):

* Federal (+0.3). Nondefense consumption expenditures (+0.5) led this category.

* State and local (+3.3). Gross investment (+2.9) dominated here.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.86% (+0.37PP from 4Qv2), a level 0.26PP above the 3Q2023 estimate. QoQ growth in gross domestic income, by contrast, was reportedly even stronger than GDP, at +4.8%, up from +1.9% in 3Q2023.

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“The strong GDP number -- 3.4% vs 3.2% expected -- is another reminder of how resilient this economy continues to be,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

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.

January 2024 International Trade (Softwood Lumber)

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With January exports of goods and services at $257.2 billion (+0.1% MoM; -0.4% YoY) and imports at $324.6 billion (+1.1% MoM; -1.2% YoY), the net trade deficit was $67.4 billion (+5.1% MoM; -4.1% YoY). 

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Softwood lumber exports rose (11 MMBF or +15.2%) in January, while imports fell (31 MMBF or -2.7%). Exports were 2 MMBF (+1.6%) above year-earlier levels; imports: 116 MMBF (-9.4%) lower. As a result, the year-over-year (YoY) net export deficit was 118 MMBF (-10.4%) lower. Also, the average net export deficit for the 12 months ending January 2024 was 9.0% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (53.8% of total softwood lumber exports -- of which Mexico: 34.0%; Canada: 19.8%), Asia (16.5% -- especially India: 4.4%; Japan: 3.2%; China: 3.0%), and the Caribbean (22.4% -- especially the Dominican Republic: 10.0%; Bahamas: 2.4%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 16.9% lower than the same month(s) of the prior year. Meanwhile, Canada was the source of most (81.2%) softwood lumber imports into the United States. Imports from Canada were 2.1% higher YTD/YTD. Overall, YTD exports were up 1.6% compared to the prior year; imports: -9.4%.

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U.S. softwood lumber export activity through the Gulf customs region represented 36.2% of the U.S. total; West Coast: 32.4%, and Eastern: 23.4%. Mobile (18.7% of the U.S. total), San Diego (16.4%) Seattle (13.2%), and Laredo (11.2%) were the most active districts. At the same time, the Great Lakes customs region handled 53.4% of softwood lumber imports -- most notably the Duluth, MN district (14.4%) -- coming into the United States. 

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Southern yellow pine comprised 24.7% of all softwood lumber exports; other pine (14.0%), Douglas-fir (13.7%), treated lumber (12.5%), and finger-jointed (10.5%) were also significant.

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.

4Q2023 Gross Domestic Product: Second Estimate

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In its second estimate of 4Q2023 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 +3.21% (+3.3% expected), down 0.06 percentage point (PP) from the “advance” estimate (“4Qv1”) and -1.65PP from 3Q2023.

As with 4Qv1, all four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), Net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the 4Q percent-change headline. “Compared to 3Q2023, the deceleration in real GDP in 4Q primarily reflected a downturn in private inventory investment and slowdowns in federal government spending, residential fixed investment, and consumer spending,” the BEA wrote, adding, “Imports decelerated.”

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As for details (billions of chained 2017 dollars; all relative to 4Qv1) --

PCE (+$5.1B):

* Goods (-$7.6B). Spending on durable goods retreated ($7.2B), led by recreational goods and vehicles (-$6.8B). A decline in nondurable goods (-$0.9B) was led by clothing and footwear (-$2.9B).

* Services (+$12.1B). Health care (+$16.5B) dominated the jump in household consumption expenditures (+$16.7B).

PDI (-$12.3B):

* Fixed investment (+$7.3B). Gains were balanced between nonresidential (+$3.4B) -- led by structures (+$6.6B) and intellectual property products (+$4.1B) but partially offset by equipment (-$8.4B) -- and residential investment (+$3.4B).

* Inventories (-$16.4B). Nonfarm inventories (-$14.2B) led the drop in this category.

NetX (-$6.7B):

* Exports (+$0.6B). Goods (+$0.4B) led the upward revision in this category.

* Imports (-$7.3B). Goods (-$4.0B) held a narrow lead over services (-$3.1B). Because imports are a subtraction in the calculation of GDP, the downward revision nudged NetX up relative to 4Qv1.

GCE (+$8.9B):

* Federal (-$0.9B). Nondefense consumption expenditures (+$-1.8B) led this category.

* State and local (+$9.6B). Gross investment (+$9.5B) dominated.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.49% (+0.28PP from 4Qv1), a level 0.11PP below the 3Q2023 estimate. 

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“This all points to more domestic demand growth than previously thought and a hotter economy in general,” said James Knightley, chief international economist at ING.

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.

December 2023 International Trade (Softwood Lumber)

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With December exports of goods and services at $258.2 billion (+1.5% MoM; +3.2% YoY) and imports at $320.4 billion (+1.3% MoM; -0.4% YoY), the net trade deficit was $62.2 billion (+0.5% MoM; -12.9% YoY). 

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Softwood lumber exports fell (18 MMBF or -16.8%) in December, along with imports (25 MMBF or -2.1%). Exports were 7 MMBF (-7.0%) below year-earlier levels; imports: 30 MMBF (+2.7%) higher. As a result, the year-over-year (YoY) net export deficit was 37 MMBF (+3.6%) higher. Also, the average net export deficit for the 12 months ending December 2023 was 7.1% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (55.5% of total softwood lumber exports -- of which Mexico: 36.4%; Canada: 19.1%), Asia (20.3% -- especially India: 6.1%; Japan: 3.7%; China: 3.4%), and the Caribbean (17.3% -- especially the Dominican Republic: 5.1%; Jamaica: 4.0%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 58.6% higher than the same month of the prior year. Meanwhile, Canada was the source of most (80.5%) softwood lumber imports into the United States. Imports from Canada were 6.6% lower YTD/YTD. Overall, YTD exports were down 1.8% compared to the prior year; imports: -6.6%.

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U.S. softwood lumber export activity through the Gulf customs region represented 35.4% of the U.S. total; West Coast: 31.6%, and Eastern: 23.7%. Mobile (14.0% of the U.S. total), San Diego (15.3%) Laredo (12.8%), and Seattle (12.7%) were the most active districts. At the same time, the Great Lakes customs region handled 56.5% of softwood lumber imports -- most notably the Duluth, MN district (17.4%) -- coming into the United States. 

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Southern yellow pine comprised 23.5% of all softwood lumber exports; Douglas-fir (14.9%), treated lumber (12.6%), other pine (14.4%) and finger-jointed (10.9%) were also significant.

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.

4Q2023 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 4Q2023 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +3.28% (+2.0% expected), down 1.59 percentage points (PP) from 3Q2023’s +4.87%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 4Q2023 was 3.11% higher than in 4Q2022; that growth rate was faster (+0.18PP) than 3Q2023’s +2.93% relative to 3Q2022.

All four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the 4Q percent-change headline.

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As for details (billions of chained 2017 dollars; all comparisons to 3Q2023) --

PCE (+$108.4B):

* Goods (+$50.8B). Spending on durable goods rose (+$23.2B), led by recreational goods and vehicles (+$20.9B). Growth in spending on nondurable goods was even stronger (+$28.1B), led by other nondurable goods (+$17.5B).

* Services (+$58.7B). Gains were led by health care (+$21.8B) and food services and accommodations (+$19.5B).

PDI (+$21.0B):

* Fixed investment (+17.2B). This increase was broadly distributed among nonresidential structures (+$5.1B), equipment (+$3.0B), and intellectual property products (+$7.3B); residential investment (+$1.9B) was quite modest, while transportation equipment (-$17.6B) showed the largest loss.

* Inventories (+$4.9B). Nonfarm inventories expanded (+$5.6B); farm: -$0.5B.

NetX (+$22.5B):

* Exports (+$38.3B). Goods exports rose by $19.5B; services: +$18.7B.

* Imports (+$15.8B). Goods imports increased by $5.4B; services: +$9.8B. Recall that the net change in imports is inversely related to the change in the GDP headline.

GCE (+31.0B): State and local consumption expenditures (+$11.8B) led this category, followed by state and local gross investment: +$9.6B).

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +3.21% (down 0.39PP from 3Q).

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Joe Brusuelas, chief economist at the tax and consulting firm RSM, said he thinks consumer spending may have been even stronger than indicated -- primarily because the report “did not adequately capture” increased holiday splurging on travel and other services. On the other hand, the Chicago Fed's National Activity Index (CFNAI) was negative in December. A CFNAI value of zero has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth; and positive values with above-average growth.

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.

3Q2023 Gross Domestic Product: Third Estimate

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In its third estimate of 3Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) returned the headline growth rate of the U.S. economy to on par with the initial estimate -- i.e., a seasonally adjusted and annualized rate (SAAR) of +4.86% (+5.2% expected), down 0.29 percentage point (PP) from the second estimate (“3Qv2”) but +2.06PP from 2Q2023.

As can be seen in the right-hand graph above, the underlying components have shifted around quite noticeably over time. In 3Qv1 and 3Qv2, three groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- had contributed positively to the headline while net exports (NetX) detracted from it. In 3Qv3, by contrast, all four components contributed positively to the headline -- although the contribution from NetX was marginal at best.

This report “primarily reflected a downward revision to consumer spending,” the BEA wrote. “Imports, which are a subtraction in the calculation of GDP, were revised down,” resulting in NetX moving ever so slightly into positive territory.

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As for details (billions of chained 2017 dollars; all relative to 3Qv2) --

PCE (-$18.1B):

• Goods (+$2.3B). Spending on durable goods retreated ($0.6B), led by motor vehicles and parts (-$0.5B). However, nondurable goods increased ($2.8B), led by gasoline and other energy goods (+$3.2B).
• Services (-$19.9B). Household consumption expenditures tumbled ($24.1B), led other services (-$16.0B).

PDI (-4.4B):

• Fixed investment (+$2.3B). Gains in nonresidential investment (+$1.4B) were led by structures (+$6.2B) but largely offset by equipment (-$2.8B) and intellectual property products (-$3.3B). Residential fixed investment was revised by +$0.8B.
• Inventories (-$6.1B). Nonfarm inventories (-$5.5B) led the drop in this category.

NetX (+$4.7B):

• Exports (-$3.4B). Services (-$3.4B) led the downward revision in this category.
• Imports (-$8.2B). Here, too, services (-$6.9B) dominated. Because imports are a subtraction in the calculation of GDP, the downward revision nudged NetX up relative to 3Qv2.

GCE (+$2.5B):

• Federal (+$0.9B). National defense consumption expenditures (+$0.4B) led this category.
• State and local (+$1.9B). Gross investment (+$1.9B) dominated here.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.60% (-0.16PP from 3Qv2), a level 1.54PP above the 2Q2023 estimate. QoQ growth in gross domestic income, by contrast, was unchanged at a less “zippy” +1.5%, up from +0.5% in 1&2Q2023.

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“Nothing here was sufficient to change the economy’s overall trajectory nor the expectation that growth slowed in the fourth quarter,” said chief economist Joshua Shapiro of MFR Inc.

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.

October 2023 International Trade (Softwood Lumber)

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With October exports of goods and services at $258.8 billion (-1.0% MoM; +1.3% YoY) and imports at $323.0 billion (+0.2% MoM; -3.2% YoY), the net trade deficit was $64.3 billion (+5.1% MoM; -18.0% YoY). 

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Softwood lumber exports ticked up (15 MMBF or +13.9%) in October, while imports rose (76 MMBF or +6.4%). Exports were 16 MMBF (+14.5%) above year-earlier levels; imports: 45 MMBF (-3.4%) lower. As a result, the year-over-year (YoY) net export deficit was 61 MMBF (-5.0%) smaller. Also, the average net export deficit for the 12 months ending October 2023 was 7.6% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (55.6% of total softwood lumber exports -- of which Mexico: 39.4%; Canada: 16.2%), Asia (16.5% -- especially Japan; 2.1%; China: 6.1%), and the Caribbean (23.2% -- especially the Dominican Republic: 8.1%; Jamaica: 6.3%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 69.5% higher than the same month of the prior year. Meanwhile, Canada was the source of most (82.8%) softwood lumber imports into the United States. Imports from Canada were 8.6% lower YTD/YTD. Overall, YTD exports were down 1.9% compared to the prior year; imports: -7.7%.

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U.S. softwood lumber export activity through the Gulf customs region represented 38.2% of the U.S. total; West Coast: 33.9%, and Eastern: 20.0%. Mobile (17.9% of the U.S. total), San Diego (19.1%) Laredo (14.5%), and Seattle (9.0%) were the most active districts. At the same time, the Great Lakes customs region handled 57.4% of softwood lumber imports -- most notably the Duluth, MN district (18.1%) -- coming into the United States. 

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Southern yellow pine comprised 24.0% of all softwood lumber exports; Douglas-fir (12.3%), treated lumber (15.5%), other pine (15.7%) and finger-jointed (11.4%) were also significant.

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.

3Q2023 Gross Domestic Product: Second Estimate

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In its second estimate of 3Q2023 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 +5.16% (+4.9% expected), up 0.29 percentage point (PP) from the “advance” estimate (“3Qv1”) and +3.10PP from 2Q2023.

As with 3Qv1, three of the four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- contributed positively to the 3Q percent-change headline. Net exports (NetX) detracted from it. The 3Qv2 update reflected “upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending,” the BEA wrote, adding, “Imports, which are a subtraction in the calculation of GDP, were revised down.”

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As for details (billions of chained 2017 dollars; all relative to 3Qv1) --

PCE (-$14.7B):

• Goods (-$1.4B). Spending on durable goods retreated ($3.9B), led by motor vehicles and parts (-$3.3B).
• Services (-$13.1B). Household consumption expenditures fell ($10.6B), led by a combination of financial services and insurance (-$6.7B) and other services (-$4.5B)

PDI (+$19.4B):

• Fixed investment (+$15.3B). Gains in nonresidential investment (+$11.0B) were led by structures (+$8.0B). Residential fixed investment was revised by +$4.1B.
• Inventories (+$3.3B). Nonfarm inventories (+$2.9B) led the gain in this category.

NetX (+$2.3B):

• Exports (-$1.6B). Services (-$1.9B) led the downward revision in this category.
• Imports (-$3.7B). Here, too, services (-$4.2B) dominated. Because imports are a subtraction in the calculation of GDP, the downward revision boosted NetX relative to 3Qv1.

GCE (+$8.3B):

• Federal (+$2.9B). Nondefense consumption expenditures (+$2.5B) led this category.
• State and local (+$5.5B). Gross investment (+$5.2B) dominated.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.76% (+0.21PP from 3Qv1), a level 1.70PP above the 2Q2023 estimate. QoQ growth in gross domestic income, by contrast, was reported to be a less “zippy” +1.5%, up from +0.5% in 1&2Q2023.

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“Evidence of economic strength over the summer could mislead some to assume the economy is on a strong trajectory — it is not,” said chief economist Gregory Daco of EY Parthenon.

“Nothing [in this report] was sufficient to change the economy’s overall trajectory nor the expectation that growth will slow significantly in the fourth quarter,” added chief economist Joshua Shapiro of MFR Inc.

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.