Reclaiming Common Sense

The final revisions to the fourth quarter 2016 Gross Domestic Product (GDP) number was released with very little fanfare. The Annualized GDP rate, based on once quarter of growth, was revised up from 1.9% to 2.1%. The Real GDP, same quarter, year to year, growth rate was revised up from 1.9% to 2.0% .Personal Consumption Expenditures, Disposable Personal Income, and the impacts of Imports and Exports on GDP were  remarkable. Here come the remarks.

Personal Consumption Expenditures Make Up for Drops in Imports and Exports.  If you examine Table 2 of the report you will see that we are a consumption based economy. While the Annualized rate of growth was 2.1% Personal Consumption and Expenditures made up 2.4% of that 2.1% . If you look further down that table imports and exports were a drag on the GDP

Disposable Personal Income Exceeded $14 trillion during the fourth quarter. The problem is that personal outlays hit $13.5 trillion as a seasonally adjusted annual rate. The personal savings rate dropped from 828 billion dollars during the 4th quarter of 2016 to $779 billion during the fourth quarter of 2016. (Table 10) Personal annual taxes approached $2 trillion dollar, up from 1.8 trillion during 2014 and 1.9 trillion during 2015.

Imports and Exports Reduced the GDP. Last year the British pound "took a pounding" after they voted for BRexit. This may have had some impact on out imports and exports. Imports and Exports, combined, reduced our GDP by 1.82% (Table 2.) The good news is that Gross Domestic Investments nearly offset the import and export losses.

There is a cornucopia of data available in the GDP report. The problem is that "everyone" is focused on the Table 1 headline number, the annualized rate of growth. Another problem is that the data is seasonally adjusted. It is downright impossible to find the unadjusted data.Finally, this third publication of the data receives a collective yawn for most in the media. The advance data was released at the end of January. The preliminary data was released at the end of February. There will be further revisions after this final revision. How much this data will be revised and how far back it will be revised we may discover after the final revision of the first quarter data.