Jack Dunn - Reclaiming Common Sense

The two headline grabbing numbers that are released each month are the total private sector jobs" number, the seasonally adjusted Current Employment Statistics worker number, and the Gross Domestic Product (GDP) Number. The GDP number has four major components: Gross Private Domestic Investments, Personal Consumption Expenditures, Government Consumption Expenditures, and the Import/Export data. We received some strong New Home Construction data and some great Durable Goods data this month. These two feed into the GPDI category. Government Spending, for better  or worse, is up considerably. Growth in Personal Consumption Expenditures can be observed in the monthly MARTS Retail report and the Consumer Price Index data. Government Spending was up huge quarter to quarter and same quarter.  The Import Export data was potentially going to be a drag on the economy. This is covered in the GDP forecast article. There were some people who were thinking that we would see a 1.6% or 1.8% Annualized GDP rate. Right before the report was released the "experts" were anticipating a headline Annualized GDP of 2.0%. This column generated a number over 2.0% and stated that 2.6% was a possibility. So what was reported today?


Annualized GDP Grew at a rate of 2.3%. This number should be revised higher next month when the preliminary Annualized GDP is released. The report had durable goods contracting at 1.1% seasonally adjusted. This is flat out wrong based on the data released yesterday. The Gross Private Domestic Investment value of 7.3% seems reasonable. Net Exports was the surprise with an increase of 4.8% and Imports at 2.6%. Export growth exceeded Import Growth. Government expenditures were up only 1.2%. This does not make sense. This may be revised higher next month.


Real GDP - Same Quarter - Was up 2.9%. We saw the same quarter GDP drop for five straight quarters from 2015q1 through 2016q2. Last Year the same quarter GDP was over 2% for all four quarters. The most recent years where that happened were 2015, 2006, and 2005. 2017 ended with an annual rate of growth of 2.3% after starting with a rate of 2.0% Could we end the year at 3.3%?   Personal Consumption expenditures were up 2.9%. GPDI was up 5.8%. Exports were up 4.3% and Imports were up 4.2%. Government Consumption was up 1.2% with Federal Spending up only 2.0%. This seems very low and may be revised higher with the release of the preliminary data.


Watch the Personal Consumption Revisions next month. How did Seasonally adjusted, and non-seasonally adjusted, retail sales increase more this year than last year and contribute less to GDP this year?  The Table 2 data had personal consumption expenditures contributing 0.73% to the GDP. last Year that contribution was 1.32%. The contribution was 1.23% during 2016 and 2.48% during 2015. We had deflation during 2015. We have more retail sales this year, January through Match, than the same period during 2018.

  • 2015: $1.228 Trillion
  • 2016: $1.275 Trillion
  • 2017: $1.328 Trillion
  • 2018: $1.392 Trillion

How can more be less?


This was a very strong GDP report. This was the highest Q1 advance annualized GDP value during the past three years. Remember that the Bureau of Economic Analysis revised how they calculated GDP during 2013. There will be two revisions, the preliminary revision and the final revision. There will also be revisions to the final revisions later this Summer. The retail market is up. Jobs are up. GDP should continue to rise for the immediate future.


It's the economy.