Q2 2024 U.S. GDP Unrevised in Third Estimate

As expected, real GDP growth in Q2 was not revised in the third estimate. GDP still grew at a solid 3.0% q/q SAAR. The Action Economics Forecast Survey had expected 2.9% q/q SAAR in this estimate. The clearly above-trend Q2 reading is more than an upwardly revised 1.6% increase in Q1.

Looking at the major spending components, consumer spending, business investment spending and housing construction were each revised slightly downward. Real PCE increased 2.8% q/q rather than the previously reported 2.9%. The growth in nonresidential fixed investment slowed to 3.9% from 4.6% previously due mostly to a slowdown in spending on intellectual property products. The decline in residential investment increased to 2.8% from 2.0% previously. By contrast, led by a marked upward revision to defense spending, government spending was revised up to a 3.1% quarterly gain from 2.7% in the second estimate.

The trade deficit widened more than previously estimated with the drag on overall GDP increasing to -90bps from -77bps previously. Inventory investment was considerably larger than previously estimated with boost to overall growth increasing to 105bps from 78bps in the second estimate.

The downward revision to most spending components led to slight downward revisions to measures of overall domestic demand. Growth of final sales to domestic purchasers was revised down to 2.8% q/q SAAR from 2.9% in the second estimate report while growth of final sales to private domestic purchasers was revised down to 2.7% from 2.9%. However, even with these revisions, the demand side of the economy was strong in Q2.

Key inflation measures for Q2 were not revised. Both the GDP price index and the PCE price index increased 2.5% q/q SAAR in Q2, the same as the second estimate.

Corporate profits were revised up significantly. They rose 3.6% q/q not annualized in Q2, up from the initially reported 1.7% quarterly gain.

Today’s report also included benchmark revisions dating back to 2019. In general, real GDP growth was meaningfully stronger than previously reported, especially over the past few years. Real GDP grew 2.9% in 2023 vs 2.5% previously reported, 2.5% in 2022 versus 1.9%, and 6.1% versus 5.8%. Consumer spending growth was also revised up meaningfully, again especially in the past few years. Real PCE increased 2.5% in 2023 versus 2.2% previously reported, 3.0% in 2022 versus 2.5%, and 8.8% in 2021 versus 8.4%. The benchmark revisions to profits were positive in each year except for 2022 with profits up a revised 6.9% in 2023 versus 1.5% reported previously, 7.8% in 2022 versus 9.8%, and 27.6% in 2021 versus 22.6%.

The benchmark revision removed the previously surprising gap between Gross Domestic Product and 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 couple of years, the GDP measure has generally exceeded the GDI measure, at times by a considerable amount. However, the benchmark revision raised the estimate of GDI significantly, so much so that the year-over-year growth of GDI in Q2 (3.5% y/y versus 2.0% previously) now stands above that of GDP (3.0%).

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.