- Prior estimate 1.5% revised higher to 2.2%
US Q2 GDP revised to 2.2% vs 1.5% expected; inflation measures soften
Real GDP: +2.2% annualized vs +1.5% expected. Previous estimate +1.5%.
Real final sales: +2.8% vs +2.3% expected. Previous estimate +2.2%.
Consumer spending: +3.8%. Previous estimate +3.4%.
GDP deflator: +6.1% vs +6.4% expected. Previous estimate +6.4%.
Core PCE prices: +3.3% vs +3.6% expected. Previous estimate +3.6%.
PCE prices: +5.0%. Previous estimate +5.3%.
PCE prices excluding food, energy and housing: +3.1%. Previous estimate +3.4%.
PCE services prices excluding energy and housing: +3.6%. Previous estimate +3.7%.
Additional second-quarter details, compared with the previous estimate:
Real final sales to private domestic purchasers: +4.6% vs +4.2%.
Real gross domestic income: +2.6% vs +2.2%.
Average of real GDP and real gross domestic income: +2.4% vs +1.8%.
Current-dollar GDP: +8.5% vs +8.0%.
Gross domestic purchases price index: +5.6% vs +5.8%.
Corporate profits increase: $384.0 billion vs $400.9 billion previously estimated.
Selected components compared with the revised first quarter:
Private domestic demand: Q2 +4.6% vs Q1 +1.8%.
Real gross domestic income: Q2 +2.6% vs Q1 +2.5%.
PCE inflation: Q2 +5.0% vs Q1 +4.2%.
Core PCE inflation: Q2 +3.3% vs Q1 +3.9%.
Corporate profits increase: Q2 $384.0 billion vs Q1 $63.4 billion.
US economic growth was stronger than previously estimated in the second quarter, according to the Bureau of Economic Analysis. Real GDP increased at a 2.2% annualized pace, above the 1.5% expected and previously reported. The 0.7 percentage-point upward revision primarily reflected stronger investment, consumer spending and government spending (see chart above) than earlier estimates showed. First-quarter growth was also revised higher, to 2.5% from 2.1%, meaning Q2 still represented a modest slowdown.
The more telling detail is underneath the headline. Real final sales to private domestic purchasers increased 4.6%, up from 4.2% previously estimated and well above the revised 1.8% first-quarter pace. This measure combines consumer spending and private fixed investment, excluding inventories, government spending and trade. It points to considerably stronger underlying private demand than the headline GDP figure alone suggests. Consumer spending, investment and exports supported overall growth, while rising imports subtracted from GDP.
Inflation revisions were more encouraging, with core PCE prices lowered to 3.3% from 3.6% and headline PCE prices reduced to 5.0% from 5.3%. However, a downward revision does not mean inflation cooled across the board compared with the previous quarter: headline PCE inflation accelerated from a revised 4.2% in Q1, while core inflation slowed from 3.9%. Corporate profits also posted a substantial increase, although the gain was trimmed from the previous estimate.
Quick analysis: The headline beat matters, but the 4.6% private-demand reading gives the report more substance. Consumers and private investment showed strength, which could give the Federal Reserve room to maintain restrictive policy. Softer core inflation provides an offset, although headline price pressures remained elevated. Stronger demand would normally support the dollar and Treasury yields; lower inflation readings could temper that response and support equities. These are backward-looking quarterly figures, so more recent inflation and employment reports remain important for judging the next policy move. The US jobs report will be released on Friday with estimates for NFP to show a 90K gain down from the oversized gain of 162K last month. The Unemployment rate is expected to remain steady at 4.1%.
US stocks have moved higher after the data dump this morning with the
- S&P up 25 points at 8:40 AM ET.
- The Dow is up 124 points and the
- Nasdaq 100 is up about 67 points.
US Treasury yields are lower across the curve:
- 2-year: 4.852%, down 3.74 basis points
- 5-year: 5.036%, down 2.73 basis points
- 10-year: 5.234%, down 2.08 basis points
- 30-year: 5.584%, down 1.00 basis point
The curve is bull steepening, with shorter-term yields falling faster than longer-term yields. The 2-to-10-year spread has widened by approximately 1.7 basis points to +38.3 basis points.
The EURUSD is now above the 100 hour MA at 1.1366 with a high of 1.1380. The 100 hour moving average has been a resistance level go in back in time since the price broke lower on September 10. Moving and staying above that moving average is a bullish tilt and would have traders looking toward its falling 200 hour moving average at 1.1405 as a upside target to also get to and through to increase the bullish bias at least in the short-term.
