The Bureau of Economic Analysis (BEA) said the initial estimate for fourth quarter (4Q) gross domestic product (GDP) in 2017 pegged U.S. economic growth at an annual rate of 2.6%. The first estimate is lower than the economic forecast models, which have underestimated real GDP growth in the last two quarters.
However, the BEA “emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency.” The “second” estimate for the fourth quarter, based on more complete data, will be released on February 28, 2018.
With the exception of the U.S. trade deficit and inventories, the fundamentals of the report laying out the initial estimate are very strong. Net exports came in at an annualized deficit of $652.6 billion.
“There is significant underlying strength in the internals of this report highlighted by consumption at +4% and CapEx spending at +11%,” TJM Investments analyst Tim Anderson said. “Combined with the growth in income, this report is ripe for upward revisions down the road.”
Americans have more money in their pockets and in 4Q they were spending it.
Current-dollar personal income increased $178.9 billion in the fourth quarter, compared with an increase of $112.3 billion in the third. The acceleration in personal income primarily reflected an upturn in personal interest income and an acceleration in nonfarm proprietors’ income.
Disposable personal income increased $139.0 billion, or 3.9%, in the 4Q juxtaposed to an increase of $73.8 billion, or 2.1% in the 3Q. Real disposable personal income increased 1.1%, up from an increase of 0.5%. Personal saving was $384.4 billion in the fourth quarter, compared with $478.3 billion in the third.
The personal saving rate — personal saving as a percentage of disposable personal income — was 2.6% in the fourth quarter, compared with 3.3% in the third.