August 29, 2019

It is important to remember that final sales is a measure of how many domestically produced goods are sold each quarter.  But we also sell goods overseas — our exports.   And we purchase goods from other countries — our imports.

In the never-ending process of analyzing the GDP data, there is yet another series called “final sales to domestic purchasers” which measures how much U.S. residents are actually spending.  It starts with final sales, but then subtracts exports (which represents how much foreigners are buying from the U.S.) and adds imports (which represents how much U.S. residents are spending on imports).  The end result is a measure of sales by domestic purchasers.

Final sales to domestic purchasers excludes both the change in inventories and trade rose by 3.6% in the second quarter after having risen 1.8% in the first quarter.  In the second quarter the deficit for net exports widened by $38.5 billion from $944.0 billion to $982.5 billion.   In that quarter exports declined 5.8% while imports rose 0.1%.  Given that final sales to domestic purchasers rose 3.6% while final sales rose 3.0%,  it is clear that the trade component subtracted 0.6% from GDP growth in the second quarter.  Over the past year this series has risen at a 2.3% pace.

Going forward the stock market should continue to climb which will boost net worth.  The consumer is confident.  Short-term Interest rates are likely to decline further in the second half of the year.  The economy is creating a reasonable number  of new jobs.  The unemployment rate is steady at a 50-year low.  Income is rising.  Furthermore, corporations are making steady profits.  Finally, the economy should continue to receive some  stimulus from the individual and corporate income tax cuts plus some repatriation of overseas earnings.

The economy should expand at a  2.5% pace in 2019 after rising 2.5% last year.

Stephen Slifer


Charleston, SC