An Inside Look at the GDP Q4 Second Estimate
This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.
Note: The charts in this commentary have been updated to include the Q4 2022 second estimate.
The chart below is a way to visualize real GDP change since 2007 and 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 2.7 percent in the fourth quarter of 2022 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.2 percent.
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 2.7%.
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. When PCE has been positive, GDP has usually been positive, and vice versa. In the latest GDP data, the contribution of PCE came in at 0.93 of the 2.7 real GDP, down from the previous quarter.
Gross private domestic investment was a positive contributor.
Net exports were positive in Q4.
Government consumption expenditures also came in as a positive contributor.
As for the role of 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 data in 1947. To one decimal place, the latest ratio of 70.5% is just below its record high.