**MNI 5 THINGS: US Q3 GDP Unrevised At +3.5%; +3.6% Expected>

--5 Things We Learned From The Second Estimate of Q3 GDP

By Kevin Kastner, Harrison Clarke, and Shikha Dave

     WASHINGTON (MNI) - The following are the key points from the second 

estimate of third quarter GDP data released Wednesday by the Bureau of 

Economic Analysis: 

     - Third quarter GDP was unrevised at +3.5% SAAR, compared with the 

modest upward revision to +3.6% that was expected, while the price 

measures were generally unrevised. However, the lack of movement in the 

headline figures hides sharp offsetting revisions in the GDP components 

that show a larger contribution from private investment, particularly a 

smaller drag from nonresidential structures building, but slower PCE 

growth and a wider net export gap. 

     - The alternative measure of real Gross Domestic Income was +4.0% 

after +0.9% in the second quarter, putting the average of the two 

measures at +3.8%, up from +2.5% in the previous quarter. There was a 

clear divergence between GDP and GDI in the first two quarters of 2018. 

     - Nonresidential fixed investment was revised up sharply to +2.5% 

from +0.8% in the advance estimate, with a large upward revisions to 

structures (-1.7% vs -7.9% adv) and equipment (+3.5% vs +0.4%) 

offsetting a downward adjustment to intellectual property (+4.3% vs 

+7.9%). Additionally, there was an upward adjustment to residential 

investment (-2.6% vs -4.0%) and stronger private inventory growth 

(+$86.6b vs +$76.3b). 

     - However, PCE growth was revised down to +3.6% from +4.0%, 

reflecting a large downward adjustment to goods spending and a smaller 

downward adjustment to services spending. The net export gap widened to 

$945.8 billion from $939.0 billion, while government spending growth was 

revised lower to +2.6% from +3.3%. The savings rate was revised down to 

6.3% vs 6.4% in the advance estimate, still down from 6.8% in the 

previous quarter. 

     - The prices measures were generally unrevised, with the GDP price 

index unrevised at +1.7% and the closely watched core PCE revised down 

slightly to +1.5% from +1.6%, both well below their rates in Q2. The y/y 

rate for the core PCE price index was unrevised at +2.0%, up slightly 

from +1.9% in the previous quarter. 

     - Real final sales of domestic product were revised down to +1.2% 

vs +1.4% in advance estimate, reflecting the removal of the upward 

adjustment to inventories. Final sales to domestic purchasers were 

unrevised at +3.1%.

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MAUDS$,M$U$$$,MAUDR$]