2018 Economic Calendar
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GDP  
Released On 8/29/2018 8:30:00 AM For Q2(p):2018
PriorConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR4.1 %4.0 %3.8 % to 4.2 %4.2 %
GDP price index - Q/Q change - SAAR3.0 %3.0 %2.9 % to 3.0 %3.0 %
Real Consumer Spending – Q/Q change – SAAR4.0 %3.9 %3.9 % to 4.0 %3.8 %

Highlights
Strength in consumer spending was shaved slightly while contraction in residential investment deepened slightly, factors however outweighed by upward revisions to both nonresidential fixed investment and government purchases with revisions to inventories and net exports also slightly favorable. The net result is a 2 tenths upward revision to second-quarter GDP to a 4.2 percent annualized rate.

Consumer spending is now at a 3.8 percent growth rate vs 4.0 percent in the first estimate. Spending on both durables and non-durables was lowered, to a still enormously strong 8.6 percent for the former and to 3.7 percent for the latter, with spending on services unchanged at 3.1 percent.

Residential investment was at minus 1.1 percent in the first estimate and is now at minus 1.6 percent in the second estimate. Nonresidential fixed investment gets a sizable 1.2 percentage point upgrade to an enormously strong 8.5 percent with components for equipment, now at 4.4 percent, and intellectual property, at 11.0 percent, both revised higher.

Inventories subtracted a little less while net exports added a little more. Government purchases are upgraded 2 tenths to a 2.3 percent growth rate.

Price readings are little changed with the overall index steady at an elevated 3.0 percent with the core 1 tenth higher at 2.8 percent. These readings had been subdued before shifting higher in the second quarter underscoring the risk of overshooting by the Fed.

The second quarter, in fact, was very strong led by consumer spending, where gains reflected strong demand for labor and also this year's tax cut, and also by business spending which has been getting a lift from this year's corporate tax cut. Exports were also very strong in the quarter.

The early outlook right now for the third quarter is mixed as goods exports sunk back in July in a negative offset by what looks to be a sharp rise in July inventories. Initial indications on consumer spending from the July retail sales report are positive. Watch for more third-quarter GDP inputs, including for inflation, in Thursday's personal income & outlays report for July.

Consensus Outlook
The second estimate for second-quarter GDP is expected to come in at a 4.0 percent annualized rate vs 4.1 percent in the first estimate. Consumer spending is expected to come in at a 3.9 percent rate vs the prior estimate's 4.0 percent. The GDP price index is seen holding at 3.0 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 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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