 | Q2 Real GDP Revision Better Than Expected |
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Implications: Real GDP was revised down for Q2, but at a 1.6% annual growth rate, still came in above where the consensus expected. Although slower growth is never good by itself, the "mix" of growth in Q2 looks better than it previously did. Personal spending and business investment were both revised upward, showing that monetary policy is gaining traction. The downward revision to overall GDP was due to inventories – leaving more room for future growth – and trade. In particular, a huge spike in imports of goods subtracted more from GDP growth than in any quarter on record (dating back to 1947). Meanwhile, domestic purchases were revised upward. Real (inflation-adjusted) final sales to domestic purchasers increased at a 4.3% annual rate. The "new" news in today's report was on corporate profits, which continued to show rapid growth. Overall, profits increased at a 20% annual rate and are up 39% versus a year ago. The rise in profits in Q2 was powered by domestic non-financial companies, whose profits increased at a 36% rate. Overall, gross domestic income (GDI) grew at a 2.4% inflation-adjusted pace in Q2. This is the third straight quarter where GDI has grown faster than GDP, suggesting potential upward revisions to the GDP numbers a year from now.
In other recent news, initial unemployment claims fell 31,000 last week to 473,000, a welcome decline after a recent surge. Continuing claims for regular state benefits declined 62,000 to 4.46 million.
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