2018 Economic Calendar
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GDP  
Released On 7/27/2018 8:30:00 AM For Q2(a):2018
PriorPrior RevisedConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR2.0 %2.2 %4.2 %3.0 % to 4.8 %4.1 %
GDP price index - Q/Q change - SAAR2.2 %2.0 %2.2 %1.5 % to 2.5 %3.0 %
Real Consumer Spending – Q/Q change – SAAR0.9 %0.5 %2.9 %2.3 % to 3.2 %4.0 %

Highlights
Leading a report that speaks to the risk of overheating, consumer spending drove GDP significantly higher in the second quarter, to a 4.1 percent annualized rate which, however, just misses Econoday's consensus for 4.2 percent. Consumer spending rose at a very strong 4.0 percent rate in the quarter to contribute 2.7 points of the total rate with spending on services contributing 1.5 points. Spending on goods, split roughly evenly between durables and nondurables, contributed 0.6 points.

Net exports were the next biggest contributor, adding 1.1 points and reflecting strong improvement in exports that offset a slight increase in imports. Nonresidential fixed investment contributed 1.0 point to the quarter led by structures and intellectual property with equipment only slightly positive. Government purchases were also a positive contributor at 0.4 points.

Inventories are another major story in this report, falling $27.9 billion for a 1.0 point subtraction from GDP. When excluding inventories (final sales), GDP came in at 5.1 percent. And the pull lower from inventories is actually a positive for the economy, as inventories are too low and need to be rebuilt which should be a positive for third-quarter GDP. Residential investment proved only marginally negative in the second quarter.

To top this very strong report off are price pressures as the GDP price index came in at a very hot 3.0 percent, vs 2.0 percent in the first quarter and exceeding Econoday's consensus range by 5 tenths. And the core, which excludes food and also energy prices which have been high, shows similar pressure, at 2.7 percent vs the first quarter's 2.4 percent.

Overheating would appear to be a danger for the economy right now, consistent with the array of regional and private economic data where delivery delays, input costs and even price pass through are at or near record highs. Today's report includes benchmark revisions including a 2 tenths upgrade to first-quarter GDP which now stands 2.2 percent. Also of note, the savings rate for 2017 is revised much higher to 6.7 percent from 3.4 percent.

Consensus Outlook
The first estimate for second-quarter GDP is expected to come in at a very strong 4.2 percent annualized rate vs the first quarter's mediocre 2.0 percent. Consumer spending is seen rising at a 2.9 percent rate vs the prior quarter's very soft 0.9 percent. A significant narrowing in the net export deficit and another rise for business investment are also expected to be positives. The GDP price index is seen at 2.2 percent, unchanged from the first quarter.

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 in the United States is always quoted at a quarterly annualized rate. It is inflation adjusted and measures at what rate the economy has expanded or contracted over a three-month period. Year-on-year rates are also useful and can offer a smoother view of the economy's trend.
Data Source: Haver Analytics
 
[Chart]
It is common to compare quarterly change at annualized rates in the GDP deflator. But these changes can be volatile and mask the trend which, just like the quarterly swings in GDP, is sometimes more visible in year- on-year change.
Data Source: Haver Analytics
 
 

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