2Q2023 Gross Domestic Product: Second Estimate

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In its second estimate of 2Q2023 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 +2.07% (+2.4% expected), down 0.35 percentage point (PP) from the “advance” estimate (“2Qv1”) but +0.07PP from 1Q2023.

As with 2Qv1, three of the four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- contributed positively to the 2Q percent-change headline. Net exports (NetX) detracted from it. The 2Qv2 update “primarily reflected downward revisions to private inventory investment and nonresidential fixed investment that were partly offset by an upward revision to state and local government spending,” the BEA wrote.

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As for details (all relative to 2Qv1):

PCE. Consumer spending was revised up by $1.1 billion (chained-2012 dollars), led by spending on services (+$1.6B) -- positive contributions primarily concentrated among food services and accommodations (+$4.3B), transportation services (+$3.6B), and the imputed value of final consumption expenditures of nonprofit institutions (+$3.6B). That gain was partially offset by a -$0.9B revision to goods spending -- especially motor vehicles and parts (-$3.8B), and gasoline and other energy goods (-$2.6B).

PDI. PDI was revised down by $20.8B, led by a drop (-$11.0B) in nonfarm inventories. Fixed investment was also revised lower (-$8.8B), led by equipment (particularly, information processing equipment: -$8.1B); residential investment was boosted by +$0.8B.

NetX. Upward revisions to imports (+$7.8B) -- which are a subtraction in the calculation of GDP -- more than offset the change in exports (+$1.1B).

GCE. Revisions to state and local gross investment (+$6.7B) dominated this category.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +2.16% (-0.12PP from 2Qv1), a level 1.98PP below the 1Q2023 estimate. 

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“Fewer economists think a recession is imminent than was the case as recently as the spring,” wrote MarketWatch’s Jeffry Bartash. Even so, Bartash inserted a note of caution from PNC Financial Services’ Gus Faucher, who observed, “Weaker growth in real gross domestic income [+0.5%], relative to GDP, may be an indication that tighter monetary policy is weighing on the U.S. economy.”

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.