2Q2023 Gross Domestic Product: Third Estimate

 

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In its third estimate of 2Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) left the headline growth rate of the U.S. economy essentially unchanged at a seasonally adjusted and annualized rate (SAAR) of +2.06% (+2.3% expected), down 0.01 percentage point (PP) from the second estimate (“2Qv2”) and -0.19PP from 1Q2023.

Although the 2Qv3 headline number was practically identical to 2Qv2, the underlying components shifted around quite noticeably. In 2Qv1 and 2Qv2, three groupings of GDP components -- personal consumption expenditures (PCE), net exports (NetX), and government consumption expenditures (GCE) -- had contributed positively to the headline while private domestic investment (PDI) detracted from it. In 2Qv3, by contrast, all four components contributed positively to the headline -- although the contribution of PCE was cut in half, PDI was increased by over 50%, NetX was revised marginally positive, and GCE was left nearly unchanged.

There were several reasons for these outsized revisions:

• Current-dollar (i.e., nominal) measures of GDP and related components were revised from 1Q2013 through 1Q2023.
• GDI and selected income components were revised from 1Q1979 through 1Q2023.
• The reference year for chain-type quantity and price indexes and for the chain-dollar estimates was updated to 2017 from 2012. The change in reference year modified quarterly real GDP estimates back to 1947, the first of year in which quarterly estimates are available.

After accounting for all the revisions, “the updated estimates show that real GDP increased at an average annual rate of 2.2% from 2017 to 2022, 0.1PP higher than the previously published estimate,” the BEA reported. 

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Given the degree of changes to the historical data, comparing this 2Qv3 report to either prior same-quarter estimates or prior quarters seems a “fool’s errand.” Nonetheless, it appears the main takeaway is that the consumer was far weaker in 2Q than previously portrayed.

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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.