Real 3rd-Quarter GDP 3.0%, Inventories Provide Boost: Personal Income Decelerates

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of
2017, according to the "advance" estimate released by the Bureau of Economic Analysis. In the
second quarter, real GDP increased 3.1 percent.

According to the BEA, the 3rd-quarter increase reflects positive contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, exports, and federal government spending. Negative contributions came from residential fixed investment, and state and local government spending. Imports, which subtract from GDP decreased.

Personal Income Decelerates

Current-dollar personal income increased $113.7 billion in the third quarter, compared with an increase of $119.1 billion in the second. The deceleration in personal income primarily reflected decelerations in personal dividend income, in rental income, and in wages and salaries that were offset by an acceleration in government social benefits, a smaller decrease in personal interest income, an acceleration in nonfarm proprietors’ income, and a smaller decrease in farm proprietors’ income.

Disposable personal income increased $73.6 billion, or 2.1 percent, in the third quarter, compared with an increase of $125.1 billion, or 3.6 percent, in the second. Real disposable personal income increased 0.6 percent, compared with an increase of 3.3 percent.

Savings Rate Decreases

Personal saving was $494.8 billion in the third quarter, compared with $545.6 billion in the second. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 3.4 percent in the third quarter, compared with 3.8 percent in the second.

Contribution Breakdown

  • PCE Goods: 0.92
  • PCE Services 0.70
  • Fixed Investment: 0.25
  • Change in Private Inventories 0.73
  • Net Exports: 0.28
  • Net Imports: 0.12
  • Federal Consumption: -0.02
  • State and Local Consumption: -0.09

Bottom Line

Once again, the GDPNow final estimate of 2.5% was far closer to the mark than the FRBNY Nowcast estimate of 1.46 last Friday. The final Nowcast, will be available later this morning.

There are two more revisions coming up. Right now, I expect those revisions will be negative.

This report was good as one might have expected. However, the good news comes at the expense of savings. A declining rate of savings was to be expected due to hurricanes. Inventories also boosted GDP.

Mike "Mish" Shedlock

Comments (10)
No. 1-10

What is "Real GDP" as opposed to "GDP" as reported without the "Real" part? Is it anything like "seasonally adjusted" employment numbers? Or sales which are "adjusted for season, weather and phase of the moon, but not for price increases?"


Inflation adjusted.


Inflation adjusted.


4th quarter (current quarter) will likely be around 5% due to strong consumer & business spending as well as further increases in inventories (retailers literally cannot keep up with strong consumer demand) however for some reason there is no


for some reason there is no inflation even though retailers are reporting overwhelming demand for most items especially designer clothing and electronics