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GDP: Final Revisions Confirm Modest Growth in Q2

September 29, 2016
Bottom Line: Economic activity was stronger in 2016 Q2-16 from previous reports. Because this revision was largely due to new June data, this suggests that the quarter ended stronger than it started. Business fixed investment - where the Fed's Janet Yellen has noted her concern about weakness-- was revised higher and drove the upward revisions. Economic activity is now a modest 1.3% above its year ago level and 10.6% above its previous peak level in 2007 Q4. 2016 Q3 ends this week -- the data released so far for July, August and early September suggest that 2016 Q3 economic activity grew at a faster pace than in Q2-16; early estimates center around 2.8%.

GDP was REVISED HIGHER by 0.3 percentage points to 1.4% in this third estimate for 2nd Quarter 2016, compared with market expectations for an upward revision to 1.3%. Economic activity is now 1.3% above its year ago level. In final sales categories, net exports, fixed investment, and exports were revised modestly higher while, government purchases, consumption, residential investment, and imports were revised slightly lower.

As a result of all of these changes, real final sales was revised up by 0.2 percentage points to 2.6% while real domestic demand was revised up by 0.1 percentage points to 2.4%.

The GDP Price Index was UCNHANGED at 2.4%, compared with market expectations no change at 2.3%. Economy-wide prices are now 1.3% ABOVE year ago levels. Economy-wide inflation hit a cyclical peak of 3.4%in 2006 Q2 and reached a cyclical nadir of 0.2% in 2009 Q3.