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2017 Fourth Quarter GDP Revisions

There is little change between the second and first estimates for fourth quarter GDP, revised 1 tenth lower ta an expected annualized rate of 2.5 percent. Consumer spending is unchanged at a very strong 3.8 percent as downward revisions were made to spending on durables, down 4 tenths to 13.8 percent, and nondurables, down 9 tenths to 4.3 percent are offset by an upward revision to the largest category off service spending, up 3 tenths at 2.1 percent. Residential investment got a noticeable upgrade to a 13.1 percent rate from 11.6 percent in the first estimate while nonresidential investment was lowered by 2 tenths to 6.6 percent. These are both very solid levels and like consumer spending, point to fundamental economic demand. Net exports virtually unchanged in today’s revisions, remain at a very sizable $625.2 billion and pulling down the quarter’s headline GDP rate by 1.1 percentage points. Inventories are also a negative factor, slowing in the quarter to an $8.0 billion build from 38.5 billion in the third quarter pulling down the headline by 0.7 points. On the positive side is government purchases in the quarter which are revised marginally lower to 2.9 percent. This rate may become a positive wildcard in future quarters given the outlook for increased deficit spending. Another possible positive is inventory growth which is off to a fast start so far this quarter as businesses scramble to restock shelves with the current strong demand we’ve been seeing. Strength is the message of this GDP report, masked by the nation’s trade imbalance and the quarter’s inventory change excluding GDP rose 4.3 percent a reading unchanged from the first estimate. On the inflation from, the GDP price index rose 2 tenths in the quarter to a 2.3 percent rate which is down 1 tenth from the first estimate though the core, however, is revised 1 tenth higher to 2.2 percent, which hints at building pressures, marks 6 tenths acceleration from the third quarter.

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