2Q2022 Gross Domestic Product: Second Estimate

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In its second estimate of 2Q2022 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of -0.58% (-0.9% expected), up 0.35 percentage point (PP) from the “advance” estimate (“2Qv1”) and +0.99PP from 1Q2022.

As with 2Qv1, two groupings of GDP components -- private domestic investment (PDI) and government consumption expenditures (GCE) -- pulled the headline estimate “into the red;” those negative contributions were partially offset by personal consumption expenditures (PCE) and net exports (NetX). 

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As for details (all relative to 2Qv1):

PCE. Consumer spending was revised up by $18.6 billion (nominal). That gain primarily occurred in purchases of goods (+$31.7B), led by recreational goods and vehicles (+$8.5B) and other nondurable goods (+$7.7B). Spending on services was revised lower (-$13.0B), led by health care (-$13.8B).

PDI. Upward revisions to private nonfarm inventories (+$12.1B) dominated this category. Notable downward revisions to fixed investment occurred in nonresidential structures (-$2.1B), software (-$4.3B), and residential investment (-$3.5B).

NetX. Downward revisions to goods exports (-$3.0B) combined with upward revisions to goods imports (+$3.3B) to pull net exports lower.

GCE. The state and local subcategory (+$8.6B) dominated this line item and was nearly evenly split between consumption expenditures (+$4.7B) and gross investment (+$3.8B).

The BEA’s real final sales of domestic product -- which ignores inventories -- was revised to +1.25% (+0.17PP from 2Qv1), a level 2.47PP above the 1Q estimate. 

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Consumer Metric Institute’s Rick Davis provided key takeaways of the report:

-- This report's headline number benefits significantly from the BEA's under recognition of inflation. For this report the BEA assumed annualized QoQ inflation of +9.02% whereas the concurrent change in CPI was +10.53%; had the BEA used the CPI deflator, real 2Q GDP change would have been -1.94%.

-- Households continue to be hammered by incomes that are failing to keep up with that inflation.

“This report shows an economy likely transitioning towards a recession,” Davis concluded. “It is being pummeled by non-traditional inflation that policy makers are fighting using traditional tools. The next few quarters will at least be interesting.”

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.