2Q20 GDP: Modest Revisions

August 27, 2020
Bottom Line: GDP in the 2nd Quarter was revised modestly higher as consumption ended the quarter stronger than previously estimated. Next exports were also revised sharply higher. Still, the losses in the 2nd Quarter were stunning at -31.7% annualized. But the good news is they are largely behind us. Nowcasting data suggested the economy bottomed in late April or early May, and thus these data are mostly old news. Most estimates suggest the 3rd Quarter rebounded about 25% annualized. GDP was REVISED UP by 1.2 points to -31.7% in this second estimate of economic activity for Q2-20. This was higher than market expectations for an upward revision to -32.5%. Economic activity is now 9.1% BELOW its year-ago level and 15.2% ABOVE its 2007 Q4 cyclical peak. Because most of the adjustment was due to new June data, this revision suggests that the economic activity increased moderately at the end of the quarter. Consumer Spending was revised higher by 0.50% to -34.1%, contributing -24.76% to economic growth. Business Fixed Investment was revised higher by 1.03% to -26.0%, contributing -3.48% to economic growth. Residential Investment was revised higher by 0.84% to -37.9%, contributing -1.72% to economic growth. Inventory Investment was revised sharply higher, contributing -3.46% to economic growth. Net Exports were revised sharply higher with a modest increase/growth in Exports and a modest decline in Imports, contributing 0.90% to economic growth. Government Purchases were revised slightly higher but grew modestly for the 11th time in the past 12 quarters, contributing 0.82% to economic growth. As a result of all of these changes, Real Final Sales was revised moderately higher while Real Domestic Demand was revised lower. The GDP Price Index was REVISED LOWER by -3.15 points to 1.8%, compared with market expectations of 1.8%. Economy-wide prices are now 0.6% ABOVE its year-ago level.