2018 Economic Calendar
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GDP  
Released On 1/26/2018 8:30:00 AM For Q4(a):17
PriorConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR3.2 %2.9 %2.2 % to 3.3 %2.6 %
GDP price index - Q/Q change - SAAR2.1 %2.3 %2.0 % to 2.6 %2.4 %
Real Consumer Spending – Q/Q change – SAAR2.2 %3.6 %2.8 % to 3.9 %3.8 %

Highlights
The 2.6 percent headline rate doesn't do justice to fourth-quarter GDP where consumer spending rose a very strong 3.8 percent that reflects a 14.2 percent burst in durable spending. Residential investment, which is another consumer-related component, rose at a very impressive 11.6 percent annualized rate. Turning to business spending, nonresidential fixed investment rose at a 6.8 percent rate which is the fourth straight mid-single digit result. Government purchases, at a 3.0 percent rate, also added to GDP in the quarter.

What pulled down fourth-quarter GDP were net exports, at an annualized deficit of $652.6 billion, and inventories which rose at a slower rate than the third quarter. Looking at final sales to domestic buyers, which excludes inventories and exports, GDP comes in at a robust 4.3 percent.

Prices also showed life in the quarter, with the index at 2.4 percent vs the third quarter's 2.1 percent. This is a standout report led by the consumer that shows the economy accelerated into year-end 2017 with strong momentum going into 2018.

Consensus Outlook
The first estimate for fourth-quarter GDP is expected to come in at a 2.9 percent annualized rate vs 3.2 percent and 3.1 percent in the prior two quarters. Consumer spending is expected to be the driver in the fourth quarter, seen rising at a consensus gain of 3.6 percent which would compare with 2.2 percent in the third quarter and 3.3 percent in the second quarter. Residential spending is also expected to show strength in the fourth quarter with inventories seen as a negative. The call for the GDP price index is 2.3 percent.

Definition
Gross Domestic Product represents the total value of the country's production during the period and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Data are available in nominal and real (inflation-adjusted) dollars, as well as in index form. Economists and market players always monitor the real growth rates generated by the GDP quantity index or the real dollar value. The quantity index measures inflation-adjusted activity, but we are more accustomed to looking at dollar values.

Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.

Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.

The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.  Why Investors Care
 
[Chart]
Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable.
Data Source: Haver Analytics
 
[Chart]
It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics
 
 

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