Third Estimate 3Q2018 GDP Lowered To 3.4%. Corporate Profits Up

The third estimate of third quarter 2018 Real Gross Domestic Product (GDP) was 3.4 % (down from 3.5%).

Analyst Opinion of GDP

Over 2 % of this 3.4% growth number is attributable to inventory growth (materials manufactured but not yet sold). I consider this a very weak report on GDP. The main reason for the marginally reduced GDP growth figure this estimate was due to higher inflation than was calculated in the previous estimates.

I am not a fan of quarter-over-quarter exaggerated method of measuring GDP - but my year-over-year preferred method showed moderate acceleration from last quarter.

The market expected (from Econoday):

Seasonally Adjusted Quarter-over-Quarter Change at annual rate Consensus Range Consensus

Advance

Actual

Second

Actual

Third

Actual

Real GDP 3.3 % to 3.6 % 3.5 % +3.5 % +3.5 % +3.4 %
GDP price index 1.7 % to 1.7 % 1.7 % +1.7 % +1.7 % +1.8 %
Real Consumer Spending - Q/Q change 3.5 % to 3.6 % 3.6 % +4.0 % +3.6 % +3.5 %
  • Headline GDP is calculated by annualizing one quarter's data against the previous quarters data. A better method would be to look at growth compared to the same quarter one year ago. For 3Q2018, the year-over-year growth is now 3.0 % - up from 2Q2018's 2.9 % year-over-year. So one might say that the rate of GDP growth improved 0.1 % from the previous quarter.

Real GDP Expressed As Year-over-Year Change

 

The same report also provides Gross Domestic Income which in theory should equal Gross Domestic Product. Some have argued the discrepancy is due to misclassification of capital gains as ordinary income - but whatever the reason, there are differences.

Real GDP (blue line) Vs. Real GDI (red line) Expressed As Year-over-Year Change

 

This third estimate released today is based on more complete source data. (See caveats below.)

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