Q2 GDP Surges 4%, Beats Estimates Driven By Inventories, Fixed Investment Spike; Historical Data Revised

Tyler Durden's picture

Moments ago the Commerce department reported Q2 GDP which blew estimates out of the water, printing at 4.0%, above the declining 3.0% consensus, as a result of a surge in Inventories and Fixed Investment, both of which added over 2.5% of the total print, while exports added another 1.23% to the GDP number. The full breakdown by component is shown below. 

As the BEA noted, "The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The "second" estimate for the second quarter, based on more complete data, will be released on August 28, 2014."

Some other components:

The change in real private inventories added 1.66 percentage points to the second-quarter change in real GDP after subtracting 1.16 percentage points from the first-quarter change.  Private businesses increased inventories $93.4 billion in the second quarter, following increases of $35.2 billion in the first quarter and $81.8 billion in the fourth quarter of 2013.

 

Real personal consumption expenditures increased 2.5 percent in the second quarter, compared with an increase of 1.2 percent in the first.  Durable goods increased 14.0 percent, compared with an increase of 3.2 percent.  Nondurable goods increased 2.5 percent; it was unchanged in the first quarter. Services increased 0.7 percent in the second quarter, compared with an increase of 1.3 percent in the first.

 

Real nonresidential fixed investment increased 5.5 percent in the second quarter, compared with an increase of 1.6 percent in the first.  Investment in nonresidential structures increased 5.3 percent, compared with an increase of 2.9 percent.  Investment in equipment increased 7.0 percent, in contrast to a  decrease of 1.0 percent.  Investment in intellectual property products increased 3.5 percent, compared with an increase of 4.6 percent.  Real residential fixed investment increased 7.5 percent, in contrast to a decrease of 5.3 percent.

 

Real exports of goods and services increased 9.5 percent in the second quarter, in contrast to a decrease of 9.2 percent in the first.  Real imports of goods and services increased 11.7 percent, compared with an increase of 2.2 percent.

 

What is interesting is that the Commerce Department announced that as a result of incomplete June data, the biggest components of the GDP beat, Inventories and Trade, were estimated. In other words, assume that future revisions of Q2 GDP will be lower, not higher, as the actual data comes in, and especially as the CapEx data, which contrary to the GDP report, has not rebounded.

 

Real federal government consumption expenditures and gross investment decreased 0.8 percent in the second quarter, compared with a decrease of 0.1 percent in the first.  National defense increased 1.1 percent, in contrast to a decrease of 4.0 percent.  Nondefense decreased 3.7 percent, in contrast to an increase of 6.6 percent.  Real state and local government consumption expenditures and gross investment increased 3.1 percent, in contrast to a decrease of 1.3 percent.

Speaking of revisions, today the BEA also released its annual revision of all data from 1999 to Q1 2014, which made last quarter's "harsh weather" -2.9% print a more palatable -2.1%, in the process throwing everyone's trendline calculations off as yet another GDP redefinition was implemented.

The chart of the original and revised data is shown below.

Here are some additional details via Bloomberg:

  • 2Q personal consumption up 2.5% vs est. up 1.9% (range 1.5%-2.9%); prior revised to 1.2% from 1%
  • Core PCE q/q 2% vs est. 1.9% (range 1.4%-2.3%)
  • Gross private investment up 17% in 2Q after falling 6.9% in 1Q
  • Residential up 7.5% after falling 5.3%
  • Purchases of durable goods jumped 14%, most since 3Q 2009
  • Corporate spending up 5.9% vs little changed q/q
  • Inventory accumulation added 1.7ppts to GDP

And the quarterly breakdown between the original and just revised data: