GDP and the Economy

Third Estimates for the Third Quarter of 2018

Real gross domestic product (GDP) increased at an annual rate of 3.4 percent in the third quarter of 2018, according to the third estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1, line 1).1 The third estimate of real GDP growth was 0.1 percentage point lower than the second estimate; the general picture of economic growth remains the same. The revised estimates reflected downward revisions to consumer spending and to exports that were partly offset by an upward revision to inventory investment.2 In the second quarter, real GDP increased 4.2 percent.

The increase in real GDP in the third quarter reflected positive contributions from consumer spending, inventory investment, nonresidential fixed investment, federal government spending, and state and local government spending. These positive contributions were partly offset by negative contributions from exports and residential fixed investment (chart 2). Imports, a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the third quarter primarily reflected a downturn in exports (line 16) and decelerations in nonresidential fixed investment (line 9) and in consumer spending (line 2). Additionally, imports increased in the third quarter after decreasing in the second (line 19). These movements were partly offset by an upturn in nonfarm inventory investment (line 14).

  • The downturn in exports (line 16) primarily reflected downturns in foods, feeds, and beverages (mainly soybeans), in petroleum and products, and in nonautomotive capital goods.
  • The deceleration in nonresidential fixed investment (line 9) primarily reflected a downturn in investment in structures (line 10). Decelerations in intellectual property products (line 12) and in equipment (line 11) also contributed to this deceleration. The main contributor to the downturn in structures was investment in mining exploration, shafts, and wells, which turned down following strong second-quarter growth.
  • The deceleration in consumer spending (line 2) reflected a deceleration in spending on durable goods (line 4) that was partly offset by accelerations in nondurable goods (line 5) and in services (line 6). The deceleration in durable goods was mainly due to a downturn in motor vehicles and parts.
  • The upturn in imports (line 19) was mostly accounted for by upturns in imported consumer durable goods (nonfood, nonautomotive) and in automotive vehicles, engines, and parts.
  • The upturn in nonfarm inventory investment (line 14) was widespread across most industries. The leading contributors were the wholesale trade and manufacturing industries.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 1.8 percent in the third quarter after increasing 2.4 percent in the second quarter (table 2, line 1, and chart 3). Food prices decelerated (line 20), increasing 0.5 percent after increasing 1.1 percent. Energy goods and services accelerated, increasing 3.3 percent after increasing 0.4 percent. Gross domestic purchases prices excluding food and energy (line 22) increased 1.8 percent after increasing 2.5 percent.

Consumer prices excluding food and energy (line 25), a measure of the “core” rate of inflation, decelerated, increasing 1.6 percent in the third quarter after increasing 2.1 percent in the second quarter.

Chart 3. Prices for Gross Domestic Purchases, bar chart

[Click chart to expand]

With the third estimates, real GDP increased 3.4 percent in the third quarter, 0.1 percentage point lower than the second estimate (table 3, line 1). Consumer spending (line 2) grew less and exports (line 16) decreased more than previously estimated. These downward revisions were partly offset by an upward revision to inventory investment (line 14).

  • The downward revision to consumer spending reflected a downward revision to goods (line 3) that was partly offset by an upward revision to services (line 6). Within goods, the largest contributor to the revision was gasoline and other energy goods. Within services, the largest contributor to the upward revision was health care services.
  • Within exports, both goods and services were revised down. The largest contributor to the revision in exports of goods (line 17) was “other” capital goods, and the largest contributor to the revision in exports of services (line 18) was maintenance and repair services.
  • The upward revision to inventory investment (line 14) reflected an upward revision to nonfarm inventories that was partly offset by a downward revision to farm inventories.
  • Within nonfarm inventories, the upward revision primarily reflected an upward revision to wholesale trade industries that was partly offset by a downward revision to “other” industries. The revision to wholesale trade was concentrated in durable goods industries. The revision to “other” industries was more than accounted for by the information industry.
  • Real gross domestic income (line 28) increased 4.3 percent in the third quarter, an upward revision of 0.3 percentage point from the second estimates. The revision primarily reflected an upward revision to domestic industries' corporate profits.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation (IVA) adjustment and the capital consumption adjustment (CCAdj), increased $78.2 billion, or 3.5 percent at a quarterly rate, in the third quarter after increasing $65.0 billion, or 3.0 percent, in the second quarter (table 4, line 1). In the third quarter, profits of domestic financial corporations decreased $6.1 billion (line 3), profits of domestic nonfinancial corporations increased $83.0 billion (line 4), and rest-of-the-world profits increased $1.3 billion (line 5).

Profits after tax (with the IVA and CCAdj) increased $69.3 billion in the third quarter after increasing $42.2 billion in the second quarter (line 10).

Industry profits (corporate profits by industry with the IVA) increased $82.3 billion, or 3.9 percent at a quarterly rate, in the third quarter after increasing $70.4 billion, or 3.5 percent, in the second quarter (table 5, line 1 and chart 4).



 

 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2018 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”