Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 15th May 17
Gold Stocks Poised to Soar Sharply Higher! - 15th May 17
This One Undiscovered Pot Stock Could Help Investors Cash In On The “Green Gold Rush” - 15th May 17
WIll Trump Tax Cuts Debt Binge Save Stock Market From Double Top Bear Plunge? - 15th May 17
Trump Rally or Geopolitical Meltdown: Currency Management for Dollar Risk - 15th May 17
A Shallow Stock Market Correction? - 15th May 17

Market Oracle FREE Newsletter

Trading Commodity Markets

BEA Raises U.S. 3rd Quarter 2012 GDP Growth Estimate to 3.09%

Economics / US Economy Dec 21, 2012 - 05:27 AM GMT

By: CMI

Economics

In their third (and "final") estimate of the US GDP for the third quarter of 2012 the Bureau of Economic Analysis (BEA) found that the economy was growing at a 3.09% annualized rate, an upward revision of +0.42% from the previously published estimate for that quarter and 1.83% better than the second quarter of 2012.



The improved headline number came primarily from substantial upward revisions to exports, consumer services and government expenditures, and a decrease in imports. Minor upward revisions in consumer goods and fixed investments was offset by a downward revision to inventories. The annualized growth rate for the BEA's bottom line "real final sales of domestic product" was also revised up significantly to 2.36%.

Perhaps most surprisingly, for the first time since the fourth quarter of 2009 real state and local government expenditures are now reported to be growing. In fact, surging governmental expenditures at all levels contributed +0.75% to the headline number -- with nominal defense spending alone growing at an astounding annualized 13.9% rate.

For this set of revisions the BEA assumed annualized net aggregate inflation of 2.74%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a substantially higher 4.98% annualized inflation rate. As a reminder: an understatement of assumed inflation improves the reported headline number -- and in this case the BEA's low "deflater" (more than 2% below the CPI-U) significantly boosted the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a much weaker 0.93%.

And the contraction rate for real per capita disposable income is now reported to have moderated slightly (although it is still reported to be contracting at a -0.24% annualized rate). During the past 6 quarters (18 months) real per capita disposable income has shrunk by $73 per year -- with $20 of that loss occurring during the past quarter. Once again the combination of increasing consumer expenditures coupled with shrinking disposable income raises concerns about the sustainability of the current recovery.

Among the notable items in the report:

-- The contribution of consumer expenditures for goods to the headline number was revised upward to 0.85% (from 0.83% in the previous report).

-- The contribution made by consumer services increased to 0.26% -- up from the 0.16% in the previous report.

-- The growth rate contribution from private fixed investments was largely unchanged at 0.12% (up slightly from 0.10% in the prior report).

-- The contribution from inventories remained relatively high (+0.73%), providing about a quarter of the headline number. Over time inventory growth should be a nearly zero-sum game, and presumably this quarter's growth from inventory building will be offset in future quarters by reduced production to shrink excessive inventories.

-- From a long term perspective, the biggest change in the third quarter's economy came from sharply increasing governmental expenditures. Growth in government spending at all levels is now reported to have added +0.75% to the headline number after subtracting -0.60% as recently as the first quarter of 2012.

-- Exports added more than a quarter of a percent to the headline number (+0.27%). The improving export picture seems to imply an improving global economy despite any number of reports to the contrary.

-- And reduced imports actually added +0.11% to the headline growth rate (a change in direction from the -0.02% previously reported).

-- The annualized growth rate of "real final sales of domestic product" was revised sharply upward to 2.36%, some 0.46% above the prior report and now at the same level as reported for the first quarter of 2012.

-- Real per-capita disposable income was down $20 during the quarter (to $32,691 per year). This is down $73 from the $32,764 reported for the 1st quarter of 2011, now some 6 quarters ago. The reported annualized contraction rate of -0.24% benefits from the relatively low deflaters used by the BEA. If per-capita disposable income were "deflated" using the BLS CPI-U (which presumably is what consumers actually experience when spending their incomes) the annualized contraction rate for per capita consumer spending power is more like -3.65%.

The Numbers (as Revised)

As a quick reminder, the classic definition of the GDP can be summarized with the following equation:

GDP = private consumption + gross private investment + government spending + (exports - imports)


or, as it is commonly expressed in algebraic shorthand:

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows:

The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Finals Sales of Domestic Product" and listed the quarters in columns with the most current to the left:


Summary

Nearly all of the detail in this revised report showed some improvement from the prior estimate. And the roughly 3% headline growth rate is well within the range of what we should be expecting some 13 quarters into an economic "recovery." However, removing the impact of the governmental spending surge, growing inventories and foreign trade removes over three-fifths of the apparent growth.

Recapping the issues that merit caution moving forward:

-- About a quarter of the headline growth rate came from a surge in governmental spending.

-- Inventory growth also contributed about a quarter of the headline growth rate. The BEA's inventory valuations are notoriously dependent on the deflators used, and the wild fluctuation of these numbers from earlier reports raises at least some concerns about their credibility. But even assuming that the reported numbers are correct, substantial growth in current inventories does not bode well for factory production schedules in future quarters.

-- The continued contraction of per-capita disposable income means that households are under sustained pressure. Any growth in consumer spending is not coming from fatter paychecks -- it is coming instead from other sources, including refinancing, strategic defaults, reduced personal savings (which now reportedly shrank by $25.9 billion during the quarter) and increased student loans.

Consumer Metrics InstituteTM
Home of Daily Consumer Leading Indicators

http://www.consumerindexes.com

© 2012 Copyright Consumer Metrics Institute - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Consumer Metrics Institute Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife