Private domestic sales suggest economic overheating.
The BEA reports Real Gross Domestic Product (GDP) increased at an annual rate of 3.4 percent in the third quarter of 2026 (July, August, and September). In the second quarter, real GDP increased 2.2 percent.
Real Third-Quarter GDP and GDI
- Real GDP 3.4%
- Real Final Sales: 1.7%
- Real Final Private Domestic Sales: 4.9%
- Real Final Domestic Sales: 5.0%
- Real GDI: N/A
Real Gross Domestic Income (GDI) is not available in the advance (first) release of the quarter.
Contributions to GDP
Percentage Point Contributions to GDP
- PCE Services: 1.89 PP
- PCE Goods: 0.63 PP
- Government: 0.90 PP
- Residential Investment: -0.12 PP
- Nonresidential Investment: 1.78 PP
- CIPI: 1.61 PP
- Exports: -0.68 PP
- Imports -2.64 PP
Change in Private Inventories and Real Final Sales
The difference between real GDP and Real Final Sales is Change In Private Inventories (CIPI) that nets to zero over time.
Thus, an essentially meaningless number added 1.61 percentage points to GDP.
Real final sales is the true bottom line estimate of the economy. It’s only 1.7 percent.
Yet, Real Private Final Domestic Sales, a number the Fed watches, are a whopping 4.9 percent.
Government Spending
Government spending (election-timed?) added 0.9 percentage points to GDP.
Hooray?
Imports and Exports
Imports don’t subtract to GDP. The have no impact of GDP at all. The D in GDP explains why.
The BEA subtracts imports because its initial assumption is that all sales are domestic.
Otherwise the BEA would be trying to figure out things like “What percentage of this hammer from Home Depot is domestic?”
Net exports are -2.64 (imports) plus -0.68 (exports) which totals -3.32 percent.
Tariffs, as expected in this corner, did nothing to fix trade imbalances. Indeed, the latest trade reports show the deficit is the widest in history ignoring the wild swings around the start of Trump’s reciprocal tariffs.
Real GDP, Real Personal Income, Real GDI
We do not have GDI or corporate profits in the advance release. But we do have real personal income.
And real personal income is only up a total of 0.79 percent since 2025 Q2.
How is that distributed? I think you know the answer. And it’s why a majority of people do not buy Trump’s preposterous claim of “greatest economy ever.”
I will discuss income in more detail in a second post.
Reflections on the Economy
Based on private domestic sales, the economy is overheating.
The surge in imports is related to AI which is also overheating. I will also do a breakdown of the AI impact on GDP shortly.
Subtract CIPI and government spending from the report and real final sales was only 0.8 percent.
Four things are obvious: The Fed is behind the curve, people are suffering from inflation, the AI boom is unsustainable, and this report is nowhere close to what the headline number looks like at first glance.
Related Posts
October 28, 2026: The September Advance Trade Balance in Goods Is Negative 134.9 Billion
Biggest Trade Deficit In History
Excluding the enormous trade distortions caused by Trump’s tariffs, we have the largest trade deficit in history.
Click for more details and charts.
October 28, 2026: The Fed Holds Interest Rates Steady with Two Dissents for a Hike
As expected, the Fed held rates steady. But a dissent by Lisa Cook is sure to anger Trump.
The Fed wants more data. Today it got more data. And a deeper dive into that topline 3.4 percent GDP suggests some real issues.
Well, this doesn’t fit the narrative, now does it? How many of you here will continue to believe (hope) that the “Trump economy” is a disastrous Depression with people who can’t afford anything, including our boy Creamer? The poor guy is probably scoping out cardboard boxes right now, looking to get a good spot in Skid Row. He can’t find a job, has no wealth and is hungrily looking at the rats in the dumpster bins (In between posts here).
I’m confused. Isn’t this economy absolutely terrible, and “the 99%” are just getting killed? How could that be?
Or is it all just a partisan exercise in PR for the Democrats?
One wonders!
Inflation came in at 3.7%. Wonder no more, m’lady.
Business Man is clueless about inflation and why people are angry.
Maybe if they used a real inflation figure to get to the “real” GDP I might give the report some credence.
I can make any wino look prosperous, a financial wizard, even, as long as that wino can continue to borrow and refinance.
Net private saving: Households and institutions is on a downtrend. So is the Personal Saving Rate
2026-01-01 5.6
2026-02-01 5.3
2026-03-01 5.1
2026-04-01 4.4
2026-05-01 4.4
2026-06-01 4.4
2026-07-01 4.5
2026-08-01 4.0
2026-09-01 3.8
Consumers are showing stress signs.
An extremely interesting bar chart would be month over month percentage increase in income (green bar) and consumption expenditures (red bar) side-by-side for each of the last six months, or longer. It’s a slide into the abyss, and the FOMC is sitting on its hands.
Warsh need a prescription to keep the Fed’s inflation target hard. It’s a lot softer than he claimed yesterday.