In what has been called the economic equivalent of hitting 00 on roulette, moments ago the BEA announced that Q2 GDP eased off from the original estimate of 1.2%, declining fractionally to 1.09%, and right on top of consensus estimates, which also expected a 1.1% print in the second quarter. This means that following the disappointing Q1 print of 0.83%, the first half economic growth is now officially just below 1%, or 0.096% to be precise.
There was little change in the constituents, with Personal Consumption revised modestly higher from an already questionable 2.83% to 2.94%, translating into 4.4% sequential increase in personal consumption, above the 4.2% expected, and higher than the pre-revised 4.2%. Also improving was fixed investment which is said to have dipped by “only” -0.42%, modestly better than the -0.52% reported a month ago. However, this was offset by a downward revision to private inventories which subtracted -1.26% from Q2 GDP, worse than the -1.16% reported previously, while trade now contibuted only 0.1%, down from 0.22% last quarter. Finally, government was also revised lower from -0.16% to -0.27%.
While there were no major surprises in the report, we urge readers to keep an eye on consumption, which as we showed one month ago, inexplicably soared in the first quarter. In fact, as shown below, after today’s revision it is just shy of the highest print reported over the past five years.
Considering recent commentary from dollar stores which plunged most on record yesterday on the back of a collapse in low-income spending, we doubt that this seasonally adjusted and goalseeked number is even remotely close to reality.
Finally, with real GDP now rising at just 1.2% Y/Y, entirely propped up by the consumer, any incremental weakness to US spending in the current quarter would push the US into a technical contraction.
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