In their third (and “final”) estimate of the US GDP for the third quarter of 2015, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +1.99% annualized rate, down -0.08% from their previous estimate — and down nearly 2% (-1.93%) from the second quarter. 

Almost all of the revisions in this report were minor, with the largest changes again involving the especially noisy inventory data. Most of the other line items were essentially unchanged. Inventories were reported to have been contracting at a -0.71% annualized rate, a -0.12% deterioration from from the -0.59% contraction rate reported in the previous estimate. As we have mentioned a number of times before, the BEA’s treatment of inventories can introduce noise and seriously distort the headline number over short terms — which the BEA admits by also publishing a secondary headline that excludes the impact of inventories. This BEA “bottom line” (their “Real Final Sales of Domestic Product”) was actually revised upward +0.04% to a +2.70% growth rate for the third quarter, from the +2.66% previously reported. 

Consumer activity once again contributed the vast bulk of the headline number (providing +2.04% in total), although that contribution was minimally less than in the previous estimate (down -0.01% in aggregate). Fixed commercial investments and governmental spending were both slightly improved, while exports and imports both weakened slightly from the previous estimate. 

Household income was revised modestly downward. Real annualized per capita disposable income was reported to be $38,248 per annum, down $12 from the previous estimate but still up $281 per year from the prior quarter. The household savings rate remained at 5.2% — up substantially from the prior quarter’s 4.7% rate. 

For this revision the BEA assumed an annualized deflator of 1.30%. During the same quarter (July 2015 through September 2015) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was slightly negative (dis-inflationary), at -0.37%. Over estimating inflation results in pessimistic growth rates, and if the BEA’s “nominal” data was deflated using CPI-U inflation information the headline number would show a much better +3.68% growth rate. 

Among the notable items in the report : 

— The headline contribution from consumer expenditures for goods was +1.08% (up +0.03% from the previous estimate, but down -0.12% from the prior quarter). 

— The contribution to the headline from consumer services weakened slightly to +0.96% (down -0.04% from the earlier estimate and -0.27% from the second quarter). The combined consumer contribution to the headline number was +2.04%, down -0.39% from 2Q-2015. 

— The headline contribution from commercial private fixed investments was revised upward to +0.60%, up +0.06% from the previous report but still down -0.23% from prior quarter. 

— As mentioned above, inventories were again revised downward — now subtracting -0.71% from the headline number instead of the -0.59% previously reported. As we have mentioned a number of times, this number should be largely ignored. 

— Governmental spending added +0.32% to the headline (nearly unchanged, and down -0.14% from the prior quarter). The reported growth was almost entirely in state and local spending. 

— The contribution to the headline number from exports (+0.09%) was less than in the previous report, and less than a sixth of the +0.64% recorded for 2Q-2015. 

— Imports subtracted slightly more from the headline number (-0.35%) than in the previous estimate. 

— The “real final sales of domestic product” is now reported to be growing at a +2.70% annualized rate, up slightly from the +2.66% in the previous estimate. Once again, this is the BEA’s “bottom line” measurement of the economy and it excludes the reported inventory contraction. 

— Also as mentioned above, real per-capita annual disposable income was reported to have grown materially during the quarter and the household savings rate also improved substantially. However, it is important to keep this improvement in perspective. Real per-capita annual disposable income is up only +4.28% in aggregate since the second quarter of 2008 — a meager annualized +0.58% growth rate over the past 29 quarters.