Business Investment Revised Up in New Third Quarter GDP Estimate

By at 29 November, 2018, 3:23 pm

by Raymond J. Keating-

In the second estimate of third quarter GDP, the U.S. Bureau of Economic Analysis points to real business investment growth not being as lackluster as initially calculated.

The topline real GDP growth number for the third quarter was unchanged at 3.5 percent. But looking at the underlying data, we see mainly positive shifts. Here’s a rundown on the key changes from the first to the second estimate of third quarter 2018 economic growth:

● First, real private fixed investment growth was upgraded from an initial estimate of -0.3 percent to +1.4 percent.

● Second, real nonresidential fixed investment (i.e., business investment) also moved up from an initial growth estimate of +0.8 percent to +2.5 percent.

● Third, within business investment, the decline in structures investment was reduced, from -7.9 percent to -1.7 percent.

● Fourth, real growth in business investment in equipment was upgraded from +0.4 percent to +3.5 percent.

● Fifth, on the flip side, growth in investment in intellectual property products was downgraded from an initial estimate of +7.9 percent to +4.4 percent.

● Sixth, the decline in residential (housing) investment was reduced, from an initial estimate of -4.0 percent to -2.6 percent.

● Seventh, personal consumption expenditure growth was downgraded from +4.0 percent to +3.6 percent.

● Eighth, and finally, the decline in real exports in the third quarter was expanded, from -3.5 percent to -4.4 percent.

Many might ignore this revision to third quarter GDP because the topline growth number did not change. But given the general upgrade in the investment numbers, the changes in the underlying data were generally positive (but for the larger decline in exports). That’s a positive for current and future growth.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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