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Economy in Brief

U.S. GDP Growth is Revised Up; Profits Strengthen
by Tom Moeller  November 29, 2017

Economic growth was revised up to 3.3% (AR, 2.3% y/y) during Q3'17 from an advance estimate of a 3.0% gain. The latest figure was the strongest in three years and equaled expectations in the Action Economics Forecast Survey.

After-tax corporate profits increased 4.9% (10.0% y/y) following a 2.0% decline. Profits without IVA & CCA gained 4.3% (5.4% y/y). Earnings in the domestic financial sector strengthened 13.7% (13.2% y/y) while nonfinancial U.S. earnings improved 1.0% (4.5% y/y). Foreign sector profits increased 4.5% (11.8% y/y).

The change in business inventories added 0.8 percentage point to growth last quarter, revised from 0.7 point. Improvement in net exports also was revised up to 0.5 percentage point from 0.4. Exports grew 2.2% (2.2% y/y). Imports fell 1.1% (+3.1% y/y), the first decline since Q1'16.

Domestic final sales growth was raised to 2.0% (2.3% y/y) from 1.8%, but it remained the weakest advance since Q1'16.

Business fixed investment grew 4.7% (4.6% y/y), revised from 3.9%, after a 6.7% rise. Equipment spending grew an increased 10.4% (6.3% y/y) as investment in information processing equipment rose 10.4% (8.0% y/y). Industrial equipment investment grew 7.5% (8.1% y/y) and intellectual property product investment improved 5.8% (3.7% y/y). Growth in these latter two categories was revised up. Structures investment fell by a deeper 6.8% (+2.9% y/y), the first decline in three quarters.

Government sector spending improved 0.4% (-0.1% y/y), revised from -0.1%. State & local government spending slipped 0.1% (-0.1% y/y), revised from -0.9%. Federal government investment increased a little-changed 1.3% (0.1% y/y). Defense spending grew 2.4% (0.1% y/y) after a 4.7% rise. Nondefense spending eased 0.4% (0.0% y/y), off for the third straight quarter.

Consumer spending growth slowed to 2.3% (2.6% y/y), revised from 2.4%, versus 3.3% growth in Q2 as nondurable goods consumption more than halved their Q2 growth to 2.0% (2.5% y/y). Gasoline & fuel oil consumption declined 3.3% (-0.9% y/y) while clothing purchases fell 0.7% (+1.6% y/y. Durable goods consumption growth quickened to 8.1% (6.1% y/y) as motor vehicle sales strengthened 12.6% (3.8% y/y). Spending on home furnishings and appliances grew 7.9% (6.7% y/y), but recreational goods purchases eased 0.2% (+8.5 y/y) following three straight quarters of double-digit growth. Services spending grew 1.5% (2.1% y/y), the weakest quarterly gain in four years. Housing and utilities spending held steady (0.5% y/y) after strengthening 3.4%. Recreation spending improved 4.1% (3.1% y/y) while restaurant & hotel expenditures rose 2.1% (1.0% y/y).

Residential investment fell a lessened 5.1% (+1.1% y/y) following a 7.3% decline in Q2.

The GDP price index rose a little-changed 2.1% (1.8% y/y). The personal consumption price index rose an unchanged 1.5% (1.5% y/y), up from the 0.3% Q2 increase. The business fixed investment price index rose 1.2% (1.3% y/y).

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

The Current Economic Outlook and Monetary Policy from Fed Chair Janet L. Yellen can be found here.

Chained 2009 $ (%, AR) Q3'17 (Second Estimate) Q3'17 (Advance Estimate) Q2'17 Q1'17 Q3'17 Y/Y 2016 2015 2014
Gross Domestic Product 3.3 3.0 3.1 1.2 2.3 1.5 2.9 2.6
  Inventory Effect 0.8 0.7 0.12 -1.5 0.1 -0.4 0.3 -0.1
Final Sales 2.5 2.26 2.95 2.7 2.2 1.9 2.6 2.7
  Foreign Trade Effect 0.5 0.4 0.2 0.2 -0.1 -0.2 -0.7 0.0
Domestic Final Sales 2.0 1.8 2.7 2.4 2.3 2.1 3.3 2.7
Demand Components
  Personal Consumption Expenditures 2.3 2.4 3.3 1.9 2.6 2.7 3.6 2.9
  Business Fixed Investment 4.7 3.9 6.7 7.1 4.6 -0.6 2.3 6.9
  Residential Investment -5.1 -6.0 -7.3 11.1 1.1 5.5 10.2 3.5
  Government Spending 0.4 -0.1 -0.2 -0.6 -0.1 0.8 1.4 -0.6
Chain-Type Price Index
  GDP    2.1 2.2 1.0 2.0 1.8 1.3 1.1 1.8
   Personal Consumption Expenditures 1.5 1.5 0.3 2.2 1.5 1.2 0.3 1.5
     Less Food/Energy 1.4 1.3 0.9 1.8 1.4 1.8 1.3 1.
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