Revised Gross Domestic Output for the Third Quarter 2018

Gross domestic product (GDP) grew 3.5 percent in the third quarter according to the second and unrevised tally from the Bureau of Economic Analysis (BEA).  Output from July through September was the second fastest pace since the third quarter of 2014; only the previous period was stronger since then.  Notwithstanding the strength relative to other periods in the current expansion, this statistic does represent a slowdown from the 4.2 percent annualized rise in the second quarter of this year.

Revisions to the components of GDP were mixed.  Consumer spending grew but was downwardly revised after more data were collected.  Offsetting this downward revision was better private investments; firms purchased more equipment than first estimated.  Also, inventories declined less than first counted which helped offset lower consumption as well.  Finally, government spending was weaker than previously thought; although federal outlays were higher in the revision (defense spending was upwardly revised), state and local spending grew much slower than first estimated.

This release also includes data on corporate profits.  As you can see in the chart above, profits accelerated for the second period in a row.  They are also up 10.3 percent versus a year earlier.  Domestic nonfinancial corporations increased 5.1 percent after an uptick of 4.2 percent.  However, domestic financial firms’ profits declined 1.7 percent after rising 3.7 percent in the second quarter. 

America’s economy is moving ahead but is losing some steam.  As you might have concluded from our morning notes, Atlas believes output is currently decelerating; this braking is in addition to slowing experienced in the third quarter of this year.  Evidence in the various indicators we watch is not completely conclusive, but it is biased to a slower narrative.