Jack Dunn - Reclaiming Common Sense

Annualized GDP Reduced to 2% - Same Quarter GDP Unchanged at 2.8%


The Gross Domestic Product (GDP) data is rear facing data as it tells use where we were during January, February, and March of this Year. The Advance 2018Q1 GDP report indicated that we were growing at 2.3% at an annualized rate. The Preliminary 2018Q1 GDP was reported at 2.2%. Today the "Final" 2018Q1 GDP was reported at 2.0%. This annualized rate is the rate the economy would grow if it grew at the same rate of growth as it did first quarter for the next three quarters. That "never" happens. The Same Quarter GDP was originally reported at 2.9%, revised to 2.8%, and the final revision was reported today at 2.8%. Why was one revised and the other was not revised? Is 2.0% accurate?


The first component of the GDP "doesn't make sense." The first component is the Personal Consumption Expenditures (PCE) category, including durable and non-durable goods and also services. The original value was 1.1%. The revised value was 1.0%. Now that growth is at 0.9%. This is seasonally adjusted. We know that the MARTS retail data has been strong. First quarter was originally reported up 4.7%. non-seasonally adjusted . The data has been revised higher since those original numbers were reported.


The Second Component, Gross Private Domestic Investments, doesn't make sense either. Originally the GPPDI growth was reported at 7.3%, revised to 7.2% and "settled" at 7.5%. What doesn't make sense is that residential investments were reported at zero growth in the advance report, it contracted at 2.0% after the first revision, and was revised to a -1.1% during the final revision. We saw the best first quarter during the past decade, non-seasonally adjusted. 


Exports were revised downward, again. The third component of GDP is the import/export data. Exports were originally at 4.8%. That data was revised down to 4.2% and settled at 3.6%. Imports grew at 2.8% during the first two reporting periods and rose to 3.2% during the final revision. Exports still exceed imports so this should be a positive, The downward revision seriously impacted the GDP number.


Government Consumption grew by 1.3%. Originally it was reported that spending grew at 1.2%. That was revised down to 1.1% before settling up at 1.3%. If you look at the monthly treasury statement, there are "no revisions" to the data from month to month.


The Same Quarter Data was "Unchanged." Originally the data was reported at a growth rate of 2.9%, revised to 2.8%, and kept at 2.8%. How is this possible? 


Normally if the rolling year, in this case the Table 8 same quarter GDP, is greater than the "Current Year" data, in this case the Table 1 data, that would indicate a potential slowdown. The Personal Consumption expenditures number should be much higher than they are - the seasonal factors are "goofy," that is a technical economic term. The seasonally adjusted data does not make sense. There were revisions to years of retail data that still need to be analyzed. Even after those revisions the growth is still strong for this year. We are coming off our best January, best February, best March, best April, and best May retail reports. Jobs are up. Wages are up faster than inflation.  How did seasonally adjusted data for PCE and GPDI decline?


GDP should be booming.  Will it be reported next month with the release of the Advance Second Quarter GDP report?


It's the economy.