2017 Economic Calendar
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GDP  
Released On 10/27/2017 8:30:00 AM For Q3(a):2017
PriorConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR3.1 %2.5 %1.9 % to 2.9 %3.0 %
GDP price index - Q/Q change - SAAR1.0 %1.6 %1.5 % to 1.9 %2.2 %
Real Consumer Spending – Q/Q change – SAAR3.3 %2.3 %1.8 % to 2.7 %2.4 %

Highlights
A rise in inventories, likely the result of hurricanes, gave a boost to third-quarter GDP, at an inflation-adjusted 3.0 percent annualized rate which tops Econoday's high estimate. Transportation snags and backup in the supply chain may have given a boost to inventories which rose $35.8 billion in the quarter and contributed 0.73 percentage points to the quarter's GDP.

But the core of the report is solid led by personal consumption expenditures which came in at a roughly as expected 2.4 percent pace and contributed 1.62 points to the quarter. Durable spending was very strong, at 8.3 percent and reflecting, at least in part, hurricane replacement demand for vehicles.

Residential investment was one of the few weaknesses, falling at a 6.0 percent pace, with nonresidential investment rising at a respectable 3.9 percent rate. Net exports are a plus, narrowing nearly $20 billion to a $595.5 billion deficit and adding 0.41 points to the quarter. Price data are back in trend following a dip in the second quarter, at 2.2 percent overall and 1.7 percent excluding food & energy.

The rise in inventories would be a concern if demand was softening, but demand is steady and any inventory overhang is likely to be drawn down during the fourth quarter. Final sales, which exclude inventories, came in at a respectable 2.3 percent. This is a solid report that points to steady momentum going into the fourth quarter.

In a special note on Hurricanes Harvey and Irma, the Bureau of Economic Analysis can't estimate the net impact on GDP but it is releasing preliminary estimates of disaster losses: at $121.0 billion for privately-owned fixed assets. Note that Hurricane Maria which hit Puerto Rico is not assessed in the GDP report which excludes territories.

Recent History Of This Indicator
Despite the heavy hurricanes, third-quarter GDP is expected to slow to a still respectable 2.5 percent annualized rate from the second quarter's very solid 3.1 percent. Consumer spending, seen at 2.3 percent vs 3.3 percent in the prior quarter, was mixed in the third quarter but will get a lift from vehicle replacement demand following Hurricanes Harvey and Irma. Business investment appeared solid but could soften from prior strength with net exports likely to contribute to growth. The GDP price index is seen rising to a 1.6 percent rate vs 1.0 percent in the second quarter.

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 growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable.
Data Source: Haver Analytics
 
[Chart]
It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics
 
 

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