Wednesday, 22 of November of 2017

Economics. Explained.  

Final Sales to Domestic Purchasers

October 27, 2017

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 by domestic purchasers rose 1.8% in the third quarter compared to an increase of 2.7% in the second quarter.  Over the past year this series has risen at a 2.3% pace.  The deficit for net exports narrowed by $18.1 billion which means that the trade component added 0.5% to GDP growth  in the third  quarter as exports rose 2.3% while imports declined by 0.8%.  We expect the deficit for net exports to neither add to nor subtract from GDP growth in 2018.

Going forward the positive factors are that the stock market remains close to another record high level.  The consumer is confident.  Consumers have record net worth.  Interest rates remain low.  The economy is creating a reasonable number  of new jobs.  The unemployment rate continues to decline slowly,  oil prices remain low, the housing sector is expanding nicely, and income is rising.  Furthermore, corporations are making steady profits, have a ton of cash, and corporate interest rates remain low.  Finally, the economy should receive some  stimulus from expected individual and corporate income tax cuts plus some repatriation of overseas earnings.

The economy should expand at a moderate 2.6% rate in 2017 and 2.8% in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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