In their third (and final) estimate of the US GDP for the second quarter of 2018, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +4.16% annual rate, down an inconsequential -0.07% from their previous estimate and but still up +1.94% from the prior quarter. 

None of the reported revisions were material. The growth rate for consumer spending for goods was revised upward by +0.04%, and there was a -0.01% decline in the growth rate of consumer spending on services. The contraction rate for inventories worsened (-0.20%) to -1.17%, while the growth rate in commercial fixed investment rose by +0.03% to +1.10%. The growth rate for imports improved to +0.10%. 

Household disposable income was revised downward by $1 per annum, and the household savings rate was unchanged from the previous report at 6.8%. 

For this revision, the BEA assumed an effective annualized deflator of 3.31%. During the same quarter (April 2018 through June 2018) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was significantly lower at 2.26%. Overestimating inflation results in pessimistic growth rates, and if the BEA’s “nominal” data was deflated using CPI-U inflation information the headline growth number would have been much higher at a +5.36% annualized growth rate. 

Among the notable items in the report : 

— The headline contribution from consumer expenditures for goods was revised upward +0.04% to +1.16% (up +1.29% from the prior quarter). 

— The contribution to the headline from consumer spending on services dropped -0.01% to +1.42%. The combined consumer contribution to the headline number was +2.58%, up over 2% (+2.22%) from 1Q-2018. 

— The headline contribution from commercial private fixed investments was +1.10%, down -0.24% from the prior quarter. 

— Inventories subtracted -1.17% from the headline number. It is important to remember that the BEA’s inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity price or currency swings) while ultimately representing a zero reverting (and long-term essentially zero-sum) series. 

— The growth in governmental spending was up slightly, adding +0.43% to the headline number (and up +0.16% from the prior quarter). 

— Exports contributed +1.12% to the headline number, up +0.69% from the prior quarter. 

— In a continuation of inverted form, imports added +0.10% to the headline number, up +0.55% from the prior quarter. In aggregate, foreign trade boosted the headline number by +1.22%. 

— The “real final sales of domestic product” growth was revised upward to +5.33%, up a dramatic +3.38% from the prior quarter. This is the BEA’s “bottom line” measurement of the economy and it excludes the inventory data. 

— As mentioned above, real per-capita annual disposable was down $1 per year from the previous report. The household savings rate was reported to be unchanged at 6.8%.