Q2 2024 U.S. GDP Revised Up in Second Estimate

Real GDP growth was unexpectedly revised up to 3.0% q/q SAAR in Q2 from the initially reported 2.8% advance. The Action Economics Forecast Survey had expected no revision to Q2. The clearly above-trend Q2 reading is more than twice the 1.4% increase reported for Q1.

The upward revision was due completely to stronger personal consumption. It rose 2.9% in the second estimate, up from 2.3% in the advance report, thereby adding 1.95%-points to overall GDP growth versus 1.57-pts in the advance report. Real spending on goods was revised up to a 3.0% quarterly gain from 2.5% in the advance report while growth in spending on services was revised up to 2.9% from 2.2% previously.

Business investment spending was a little weaker in the second estimate. Nonresidential fixed investment growth was revised down to 4.6% from 5.2% in the advance report. The initially reported 1.4% quarterly decline in residential investment was revised to a 2.0% decline. The rebound in inventory investment in Q2 was revised down slightly, resulting in a 4-basis point downward revision in its contribution to overall growth. The trade deficit widened further upon revision with its drag on overall growth increasing by 5 basis points. Government spending growth was also revised slower, to 2.7% from 3.1% previously. Growth in spending by both the federal government and state and local governments was revised lower. Federal government spending increased 3.3% versus 3.9% previously while state and local government spending grew 2.3% versus 2.6% in the advance report.

The meaningful upward revision to personal spending led to upward revisions to measures of overall domestic demand. Growth of final sales to domestic purchasers was revised up to 2.9% q/q SAAR from 2.7% in the advance report while growth of final sales to private domestic purchasers was revised up to 2.9% from 2.6%. Clearly, the demand side of the economy was strong in Q2.

The second estimate of Q2 GDP contained the first look at corporate profits. They rebounded in Q2, increasing 1.7% q/q not annualized after having declined 1.4% in Q1. Profits of domestic industries rose 2.7%, more than offsetting their 1.7% decline in Q1. By contrast, rest of world profits plummeted 3.5% following a meager 0.4% gain in Q1.

The second estimate of GDP also contains the first estimate of Gross Domestic Income. There are two basic ways to measure the production of an economy. The most popular one, Gross Domestic Product, is calculated by adding expenditures and adjusting for change in inventories. The other method is called Gross Domestic Income. It is calculated by aggregating the income generated from producing goods and services. These two methods should produce similar measures of production. However, over the past seven quarters, the GDP measure has generally exceeded the GDI measure, at times by a considerable amount. That deviation continued in Q2 with GDP rising 3.0% while GDI increased only 1.3%.

Inflation as measured by GDP price indexes was generally revised slightly higher in Q2. The rise in the overall GDP price was revised up to 2.5% q/q SAAR from 2.3%, but still a marked slowdown from the 3.1% increase in Q1. PCE inflation was revised down a tick to 2.5% from 2.6% previously. The increase in prices of fixed investment was revised up to 2.5% from 1.8%. Export prices were revised up to a 2.8% increase from 2.3% previously while the gain in import prices was revised down to 2.4% from 2.7%. Prices paid by governments rose 2.1% versus 1.8% in the advance report, due solely to an upward revision to prices paid by the federal government.

The GDP data can be found in Haver’s USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in AS1REPNA.