The BEA revised its Fourth-Quarter 2017 GDP estimate to 2.9%, topping the consensus estimate of 2.7%.

Rick Davis at the Consumer Metrics Institute provides this summary.

  • The boost in the headline number resulted from upward revisions to contributions from consumer spending (+0.17%) and inventories (also a +0.17% increase, as a result of reportedly slower inventory contractions). No other line items changed materially.
  • The BEA's "bottom line" for the quarter (their "Real Final Sales of Domestic Product", which excludes inventories) increased to +3.41%, up +0.18% from the previous estimate and +1.04% from the prior quarter.
  • Real annualized household disposable income decreased -$2 per year from the previous report to $39,223 (in 2009 dollars). The household savings rate deteriorated to 2.6%, lower than the level recorded in third quarter of 2007 -- at the onset of the "Great Recession."
  • For this revision the BEA assumed an effective annualized deflator of 2.35%. During the same quarter (October 2017 through December 2017) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was a very similar but slightly higher 2.49%. Under estimating inflation results in optimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline growth number would have been slightly lower at a +2.82% annualized growth rate.

What Happened?


Hurricane spending undoubtedly boosted fourth-quarter GDP, and consumers had to tap into saving to buy.

Retail sales have not been good so far in 2018 so expect a snapback in the first quarter.

The GDPNOw Real Final Sales estimates for the first quarter sit at 1.1%.

Mike "Mish" Shedlock

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