GDP:  Q2 Even Stronger In 2nd Estimate

August 29, 2018
Bottom Line: Economic activity in the 2nd Quarter was higher in the 2nd estimate, stronger than expected. Business fixed investment finished the quarter sharply higher than previously estimated, while consumption was modestly lower than previously estimated, suggesting consumption decelerated modestly going into the end of the quarter. Trade was also stronger than previously estimated -- recall that trade in 2Q was heavily impacted by front-running of tariffs, providing a one-off boost to exports. Overall this data indicates that 2018 Q3 GDP is tracking in line with the consensus estimate of 3.1%. GDP was REVISED UP by 0.1 points to 4.2% in this second estimate of economic activity for Q2-18. This was higher than market expectations for a downward revision to 4.0%. Economic activity is now 2.9% ABOVE its year ago level. Because most of the adjustment was due to new June data, this revision suggests that the economic activity increased modestly at the end of the quarter.
  • Consumer Spending was revised lower by -0.23% to 3.8%, contributing 2.55% to economic growth.
  • Business Fixed Investment was revised higher by 1.13% to 8.5%, contributing 1.13% to economic growth.
  • Residential Investment was revised lower by -0.62% to -1.6%, contributing -0.06% to economic growth.
  • Inventory Investment was revised slightly higher, contributing -0.97% to economic growth.
  • Net Exports were revised moderately higher with a slight decline in Exports and modest decline in Imports, contributing 1.17% to economic growth.
  • Government Purchases were revised slightly higher and grew modestly for the 9th time in the past 12 quarters, contributing 0.41% to economic growth.
As a result of all of these changes, Real Final Sales was revised modestly higher while Real Domestic Demand was nearly unchanged. The GDP Price Index was REVISED UP by 0.05 points to 3.0%, compared with market expectations for no change at 3.0%. Economy-wide prices are now 2.4% ABOVE its year ago level.