Text: Commerce Dept Tech Note On 3Q US GDP - Advance Release>

     WASHINGTON (MNI) - The following is the text of a Bureau of 

Economic Analysis technical note for the advance release of third 

quarter U.S. GDP released by the Commerce Department, including 

comments on hurricane impact: 

Real GDP

     Real GDP increased 3.0 percent (annual rate) in the third quarter 

of 2017, following an increase of 3.1 percent in the second quarter of 

2017. The increase in real GDP in the third quarter reflected positive 

contributions from personal consumption expenditures (PCE), private 

inventory investment, nonresidential fixed investment, exports, and 

federal government spending.  These increases were partly offset by 

negative contributions from residential fixed investment and state and 

local government spending. Imports, which are a subtraction in the 

calculation of GDP, decreased. 

     The deceleration in real GDP growth in the third quarter primarily 

reflected decelerations in PCE, in nonresidential fixed investment, and 

in exports that were partly offset by an acceleration in private 

inventory investment and a downturn in imports. 

Key Source Data and Assumptions for the Advance Estimate

     The advance GDP estimate for the third quarter of 2017 is based on 

source data that are incomplete and subject to updates. Three months of 

source data were available for consumer spending on goods; shipments of 

capital equipment; motor vehicle sales and inventories; durable goods 

manufacturing inventories; wholesale and retail trade inventories; 

exports and imports of goods; federal government outlays; and consumer, 

producer, and international prices. For major source data series for 

which only two months of data are available, BEA's key assumptions for 

the third month are shown in the "Key Source Data and Assumptions" table 

on the BEA Web site. 

Prices

     The PCE price index increased 1.5 percent in the third quarter, 

following an increase of 0.3 percent in the second quarter. Excluding 

food and energy prices, the PCE price index increased 1.3 percent after 

increasing 0.9 percent. 

Disposable Personal Income

     Real disposable personal income increased 0.6 percent in the third 

quarter, following an increase of 3.3 percent in the second. The 

personal saving rate was 3.4 percent in the third quarter, compared with 

3.8 percent in the second. 

Impact of Hurricanes on Third Quarter 2017 Estimates

     During the third quarter, two major hurricanes caused severe damage 

and flooding in several states along the Gulf Coast. Hurricane Harvey 

made its initial landfall on August 25 in Texas, and made a second 

landfall in Louisiana on August 30 as a tropical storm. On September 10, 

Hurricane Irma hit the lower Florida Keys and the southern mainland of 

Florida. These disasters disrupted production at facilities such as 

factories, offices, and transportation centers. For example, oil and gas 

extraction and petroleum and petrochemical production in Texas and 

agricultural production in Florida were impacted. Other types of 

production, such as emergency services and rebuilding activities, 

increased. These impacts on production are included, but not separately 

identified, in the source data that BEA uses to prepare the estimates of 

GDP; consequently, it is not possible to estimate the overall impact of 

Hurricanes Harvey and Irma on 2017 third quarter GDP. 

     A third hurricane, Maria, made its initial landfall on the U.S. 

Virgin Islands and Puerto Rico on September 20 causing catastrophic 

damage to these island areas. Because BEA's estimates of GDP do not 

include commonwealths or territories of the United States, the impacts 

of Maria are not directly reflected in the estimate of U.S. GDP. For 

more information, see the FAQ "Are Puerto Rico and the U.S. Territories 

included in the estimates of U.S. GDP?" 

     While the destruction of fixed assets, such as residential and 

nonresidential structures, does not directly affect GDP, national 

income, or personal income, BEA does estimate disaster losses as part of 

its fixed assets accounts. BEA's preliminary estimates show that 

Hurricanes Harvey and Irma resulted in disaster losses of $121.0 billion 

in privately-owned fixed assets ($484.0 billion at an annual rate) and 

$10.4 billion in government-owned fixed assets ($41.8 billion at an 

annual rate). 

     BEA also prepares estimates of the insurance benefits paid or 

received due to major disasters. These benefits are recorded on an 

accrual basis in the quarter in which the disaster occurred and are 

classified as capital transfers; therefore they do not affect the 

measures of GDP, personal income, or saving. BEA's preliminary estimates 

show domestic insurance companies expect to pay benefits for disaster 

losses related to Hurricanes Harvey, Irma, and Maria in the amount of 

$64.7 billion ($258.7 billion at an annual rate). The federal 

government's National Flood Insurance Program expects to pay an 

additional $19.0 billion ($76.0 billion at an annual rate); Florida 

Citizens Property Insurance Corporation expects to pay $1.2 billion 

($4.9 billion at an annual rate); and foreign insurance companies expect 

to pay $17.4 billion ($69.4 billion at an annual rate). 

     For additional information, see "How are the measures of production 

and income in the national accounts affected by a natural or man-made 

disaster? 

     ** MNI Washington Bureau (202) 371-2121 ** 

[TOPICS: M$U$$$]