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

No. 1-10

Hey Robin and Blacklisted. Personally, I have done very well thank you, being almost fully invested for the last 8 years, while the prophets of doom continue to say the "end is near". If you want to continue with the "chicken little" routine, that's fine with me. Barring a black swan event, there isn't any "implosion" coming. Have you guys been all cash for long?


The global economy always implodes from the periphery to the core ($US). Those that think the rest of the world is dragging the US economy along have it backwards, and I will bet those same people are the ones that have missed the 80+% rise in stocks over the last 5 yrs, and constantly get stopped out of their shorts. It is the rest of the world's politicians that are more desperate to raise taxes, and it is the rest of the world that will implode first as the dollar and rates rise, due to the mountains of dollar-based debts they hold. When I do the math, investment capital is an order of magnitude more than trade, QE's, and stock buy backs, but I'm willing to bet the majority, which always must be wrong, will continue to the think linearly and from a US-centric perspective. As countries, RE, and bonds implode, where else is global capital going to park?


I would expect the global economy to be "doing nicely" with $15 trillion of stimulus since 2009. The problems start when the central banks remove $1 trillion of stimulus next year with grossly inflated asset price values. We are in the Ponzi phase of the Minsky Cycle! Most business cycles last eight to nine years. As they say in your neck of the woods; do the math!


The world economy is growing nicely, and is actually dragging the US economy along for the ride. The US will continue to do well as long as the rest of the world keeps growing, and as long as Trump doesn't start a trade war.


Thanks for not posting me Mish, my guess was more wishful thinking than anything else. I think the stock market is having a bigger impact than what we or at least I thought initially beyond the 1% or even 10 so many retirement accounts loaded up with equity investments have increased to the point where many feel safe to dip into savings to sustain their lifestyle at the present time.