Second Estimate 2Q2018 GDP Growth Improves To 4.2 % -

Second Estimate 2Q2018 GDP Growth Improves To 4.2 %

Aug 29, 2018Jeremy ParkinsonFinance0

The headline second estimate of second quarter 2018 Real Gross Domestic Product (GDP) marginally improved to a positive 4.2 % from the advance estimate’s 4.1 %. Year-over-year growth was modestly revised upward from the advance estimate.

Analyst Opinion of GDP

There was minor change between the advance and this second GDP estimate. The biggest change was an improvement in fixed investment – everything else seemed to have minor tweaks. I am not a fan of a quarter-over-quarter exaggerated method of measuring GDP – but my year-over-year preferred method showed good acceleration from last quarter.

The market expected (from Nasdaq / Econoday):

Seasonally Adjusted Quarter-over-Quarter Change at annual rate Consensus Range Consensus

Advance

Actual

Second

Actual

Third

Actual

Real GDP 3.0 % to 4.8 % 4.2 % +4,1 % +4.2 % GDP price index 1.5 % to 2.5 % 2.2 % +3.0 % +3.0 % Real Consumer Spending – Q/Q change 2.3 % to 3.2 % 2.9 % +4.0 % +3.8 %

Headline GDP is calculated by annualizing one quarter’s data against the previous quarters data. A better method would be to look at growth compared to the same quarter one year ago. For 2Q2018, the year-over-year growth is now 2.9 % – up from 1Q2018’s 2.6 % year-over-year and the advance estimates 2.8 % growth. So one might say that the rate of GDP growth improved 0.3 % from the previous quarter.

Real GDP Expressed As Year-over-Year Change

The same report also provides Gross Domestic Income which in theory should equal Gross Domestic Product. Some have argued the discrepancy is due to misclassification of capital gains as ordinary income – but whatever the reason, there are differences.

Real GDP (blue line) Vs. Real GDI (red line) Expressed As Year-over-Year Change