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GDP: 2nd Estimate of Q2 revised down slightly

August 29, 2016

Bottom Line: Economic activity was slightly lower than previously estimated in 2016 Q2-16. In final sales categories, fixed investment, and consumption were revised higher while net exports, residential investment, and government purchases were revised lower. These revisions were due to updated June data, which shows that while consumption improved, overall activity ended the quarter sluggishly, presenting downside risks to the current estimates of 1.55 for 3Q-16. Corporate profits fell 1.2% on the quarter versus growth of 3.4% in 1Q.

GDP was REVISED DOWN by 0.1 points to 1.1% in this second estimate of economic activity for Q2-16. This was in line with market expectations.

Economic activity is now 1.2% ABOVE its year ago level and 10.5% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new June data, this revision suggests that the economic activity declined slightly at the end of the quarter.

Consumer Spending was revised higher by 0.17% to 4.4%, contributing 2.94% to economic growth. Business Fixed Investment was revised higher by 1.36% to -0.9%, contributing -0.11% to economic growth. Residential Investment was revised lower by -1.58% to -7.7%, contributing -0.30% to economic growth. Inventory Investment was revised slightly lower, contributing -1.26% to economic growth.

Net Exports were revised moderately lower with a no change decline in Exports and modest growth in Imports, contributing 0.10% to economic growth. Government Purchases were revised slightly lower and fell modestly for the 5th time in the past 12 quarters, contributing -0.27% to economic growth.

As a result of all of these changes, Real Final Sales was revised slightly lower while Real Domestic Demand was revised modestly higher. The GDP Price Index was REVISED UP by 0.1 points to 2.4%, compared with market expectations of 2.2%. Economy-wide prices are now 1.3% ABOVE its year ago level.

Article by contingentmacro