In their second estimate of the US GDP for the second quarter of 2017, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +3.04% annual rate, up +0.48% from their previous estimate and up +1.80% from the prior quarter. 

Consumer spending was revised upward to a +2.27% annualized growth rate (up +0.34% from the previous estimate and up +0.95% from the prior quarter). The inventory contribution continued to be essentially neutral (+0.02), while the previous growth in commercial fixed investment was revised upward (to +0.58%). Governmental spending was revised back into contraction (-0.05%), and the growth rates for both exports (+0.45%) and imports (-0.23%) moderated. 

The BEA’s “bottom line” (their “Real Final Sales of Domestic Product”, which excludes inventories) was revised upward to +3.02%, up +0.32 from the prior quarter. 

Real annualized household disposable income was revised upward $6 to $39,292 (in 2009 dollars). The household savings rate was again revised downward by -0.1% to 3.7% (down -0.2% from the prior quarter). 

For this revision the BEA assumed an effective annualized deflator of 0.96%. During the same quarter (April 2017 through June 2017) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was a minuscule 0.06%. Over estimating 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 materially higher at a very healthy +3.96% annualized growth rate. 

Among the notable items in the report : 

— The headline contribution from consumer expenditures for goods was reported to be +1.27% (up +1.12% from the prior quarter). 

— The contribution to the headline from consumer spending on services also strengthened to +1.00% (although that remained down -0.17% from the prior quarter). The combined consumer contribution to the headline number was +2.27%, up +0.95% from 1Q-2017. 

— The headline contribution from commercial private fixed investments was revised upward to +0.58%, although that was still down a material -0.69% from the prior quarter. That continued to reflect a reported contraction in residential construction. 

— Inventory continued to be neutral (at +0.02%). This was a +1.48% improvement from the prior quarter. 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. 

— Governmental spending was reported to be contracting slightly, at a -0.05% rate. This was a +0.06% improvement from the prior quarter. 

— Exports contributed +0.45% to the headline number, down -0.40% from the prior quarter. 

— Imports deducted -0.23% from the headline, which was up +0.40% from the prior quarter. In aggregate, foreign trade added +0.22% to the headline number. 

— The “real final sales of domestic product” grew at an annualized 3.02%, up +0.32% 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 income was revised downward slightly (by $6 per annum). At the same time the household savings rate was reported to have dropped another -0.1% (now down -0.2% from the prior quarter). It is important to keep this line item in perspective: real per-capita annual disposable income is up only +7.13% in aggregate since the second quarter of 2008 — a meager annualized +0.77% growth rate over the past 36 quarters.