The
Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 2Q2022
U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate
(SAAR) of -0.93% (+0.5% expected), up
0.64 percentage point (PP) from 1Q2022’s -1.57%.
On
a year-over-year (YoY) basis, which should eliminate any residual seasonality
distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 2Q2022 was
1.6% higher than in 2Q2021; that growth rate was slower (-1.9PP) than 1Q2022’s +3.5%
relative to 1Q2021.
Two groupings of GDP components -- personal consumption expenditures (PCE) and net exports (NetX) -- contributed positively to the 2Q headline. However, that combination was more than offset by private domestic investment (PDI) and government consumption expenditures (GCE).
As
for details (all comparisons to 1Q2022) --
PCE (Contributed 0.70PP to the headline, down 0.54PP from 1Q):
*
Goods. Spending on non-durable goods rose (+$81.7 billion, nominal), led by
gasoline and other energy goods (+$56.0B). Spending on durable goods fell (-$6.6B),
dominated by recreational goods and vehicles (-$10.4B).
*
Services. Gains (+$255.3B) were broad-based, led by housing and utilities (+$62.6B)
and food services and accommodations (+$59.1B).
PDI (Subtracted 2.73PP, down 3.66PP from 1Q):
*
Fixed investment. Gains in this category (+$57.9B) were led by intellectual
property products (+$43.2B); residential investment fell (-$6.4B).
*
Inventories. Nonfarm inventories shrank by $118.5B; farm: -$0.7B.
NetX (Added 1.43PP, up 4.66PP from 1Q):
*
Exports. Goods exports rose by $191.7B; services: +$55.4B.
*
Imports. Goods imports rose $98.5B; services: +$48.9B.
GCE (Subtracted 0.33PP, up 0.18PP from 1Q). Although GCE fell on a QoQ
percentage basis, the category saw gains in absolute terms -- primarily in
state and local consumption expenditures (+$85.0B)
Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +1.08% (up 2.30PP from 1Q).
Consumer
Metric Institute’s Rick Davis
summarized the key points of this report as follows:
--
Consumer spending on goods moved deeper into contraction, with the growth rate
for all consumer spending declining by about a half percent.
--
Commercial spending on fixed investment also began to contract, primary due to
weakening residential construction.
--
Real household income and savings rates continued to shrink. The consumer is in
no position to quickly reverse the course of the headline number.
--
The BEA continues to under-recognize inflation. The headline number would have
been contracting at a far more dramatic -3.18% rate if the BEA had used
inflation data from the Bureau of Labor Statistics (BLS). [Ed note: CMI uses end-of-quarter
CPI values in its estimation of GDP change; substituting quarterly average CPI
values (which we believe more completely encompasses conditions during the
respective quarters) yields a less-dire -2.43%.]
“At
face value this is the second consecutive quarter that the headline number
indicated economic contraction,” Davis wrote. “However, the National Bureau of
Economic Research (NBER) is the official arbiter of recessions in the US, and
they are not especially timely in making their calls. Meanwhile, politicians
(and even the FED) will be busy spinning other (currently more favorable)
definitions of recessions, including unemployment rates.
“Our
own go-to source of wisdom, Douglas Adams, once wrote: ‘If it looks like a
duck, and quacks like a duck, we have at least to consider the possibility that
we have a small aquatic bird of the family Anatidae on our hands.’ We couldn't
agree more,” Davis concluded.
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment
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