Visualizing GDP: An Inside Look at the Q1 Second Estimate
Note: The charts in this commentary have been updated to include the Q1 2018 Second Estimate released yesterday morning.
The chart below is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics:
Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the first quarter of 2018 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2017, real GDP increased 2.9 percent.
The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.3 percent. With this second estimate for the first quarter, the general picture of economic growth remains the same; downward revisions to private inventory investment, residential fixed investment, and exports were partly offset by an upward revision to nonresidential fixed investment. [more here]
Let's take a closer look at the contributions of GDP of the four major subcomponents. The data source for this chart is the Excel file accompanying the BEA's latest GDP news release (see the links in the right column). Specifically, it uses Table 2: Contributions to Percent Change in Real Gross Domestic Product.
Note: The conventional practice is to round GDP to one decimal place, the latest at 2.2%. The GDP in the chart above is the real GDP calculated to two decimal places.
Here is a chart of the latest estimates.
Over the time frame of this chart, the Personal Consumption Expenditures (PCE) component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has usually been positive, and vice versa. In the latest GDP data, the contribution of PCE came at 0.71 of the 2.17 real GDP, down from the previous revision but still a positive contribution to Q1 GDP.
Gross Private Domestic Investment was a positive contributor.
Net Exports were positive in Q1.
Government Consumption Expenditures came in positive with a small contribution.
As for the role of Personal Consumption Expenditures (PCE) in GDP and how it has increased over time, here is a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP in 1947. To one decimal place, the latest ratio of 69.4% is just below its record high.