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Oct 29 2018

Q3-2018 GDP Review

GDP Review Snapshot

- Real GDP grew at an annual rate of 3.5% in the third quarter of 2018, exceeding expectations.
- Consumer spending was the largest contributor to real GDP growth.
- Wages and salaries continued to rise steadily, while the inflation rate dropped substantially.


The Bureau of Economic Analysis (BEA) reported that real gross domestic product (RGDP) grew at a 3.5% annual rate[1] in Q3-2018. Nominal GDP (NGDP), which measures total spending in the economy without adjusting for inflation, increased by 4.9%. The difference between NGDP and RGDP growth is the GDP deflator.

Consumer spending contributed +2.69 (+1.59[2]) percentage points to the measured RGDP growth rate of 3.5%. Business non-residential fixed investment (structures, equipment, and intellectual property) contributed +0.12 (+0.67) percentage points. Residential investment subtracted -0.16 (+0.16), while business inventory investment added 2.07 (+0.17) percentage points. Federal government spending contributed +0.21 (-0.04) percentage points and spending by state and local governments contributed +0.35 (-0.06) percentage points. Net exports subtracted -1.79 (-0.22) percentage points from RGDP growth.



RGDP growth averaged 3.0% over the last six quarters compared to the Obama Administration’s 2.2% recovery average despite its predictions that faster growth was no longer attainable. Likewise, take-home pay (real disposable income—inflation-adjusted income after taxes) is growing faster. It has averaged 2.7% over the last 6 quarters compared with an Obama-era recovery average of 2.3%. The improved economic outlook reaffirms that common-sense pro-growth policies work.

Although some claim that the benefits of economic growth only accrue to the wealthy, a recently released JEC study debunks that claim. It illustrates that worker pay—properly measured and adjusted for inflation—is growing.


Inflation slowed markedly in the third quarter, which may lead the Federal Reserve to hold off raising interest rates later this year.

Consumer spending was strong in categories such as furniture, computers, TVs, sporting goods, groceries, health care, and restaurant spending.

Reduced oil drilling investment contributed to slower business investment growth.

Two updates to this advance Q3 GDP estimate are scheduled by BEA for November 28 and December 21. The Q4-2018 GDP report is scheduled for release on January 30, 2019, at 8:30 am.

[1] Quarterly numbers are reported here at annual rates unless stated otherwise. An annual rate for a quarter means BEA calculated the change from the previous quarter as if it occurred throughout a year.

[2] A component’s average contribution to RGDP growth during this economic expansion, which began Q3-2009, is shown inside the parentheses.