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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:

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Wed, 07/30/2014 - 08:56 | 5021962 Stoploss
Stoploss's picture

LOL!!!

Wed, 07/30/2014 - 09:00 | 5021975 Pig Circus
Pig Circus's picture

If 2nd Q GDP is revised down by the same percentage as 1Q the final number will be -8.9%.

 

Joe The Forehead.

Wed, 07/30/2014 - 09:03 | 5022018 nink
Wed, 07/30/2014 - 09:05 | 5022037 max2205
max2205's picture

Is this an Onion article?

Wed, 07/30/2014 - 09:07 | 5022041 kliguy38
kliguy38's picture

no shit LMFAO

Wed, 07/30/2014 - 09:15 | 5022086 NoDebt
NoDebt's picture

Only two more quarters @ 4% growth and we'll actually break 2% growth for the full year.

So, show of hands, who bought the dip yesterday?

There has never been a better time to buy stawks.

Wed, 07/30/2014 - 09:26 | 5022151 onewayticket2
onewayticket2's picture

it HAD to be over the (absolute value) decline last time....minus 3.9%....so +4% makes perfect sense.

 

now, the revisions can bring it back down.

Wed, 07/30/2014 - 09:29 | 5022162 BurningFuld
BurningFuld's picture

They are just copying China now. Can we have some originality here!

Wed, 07/30/2014 - 09:55 | 5022297 pods
pods's picture

Rumor has it we have outsouced all statistics to China now.

pods

Wed, 07/30/2014 - 10:13 | 5022397 666
666's picture

Durable goods will continue to do well as long as moar planes keep crashing and/or being shot down.

Wed, 07/30/2014 - 10:31 | 5022460 dontgoforit
dontgoforit's picture

I'll see your 4% and raise you 2%!  But, I reserve the right to take back my raise if you call because your original bet may be -1.0% lower if you get any unexpected facts slung in your face.

Wed, 07/30/2014 - 11:04 | 5022634 Dollarmedes
Dollarmedes's picture

Do stock buybacks count as CapEx?

Wed, 07/30/2014 - 11:06 | 5022644 Stackers
Stackers's picture

All Hail the Hockeystick !

Wed, 07/30/2014 - 11:13 | 5022689 Badabing
Badabing's picture

+4% did we just add hookers and blow to our GDP too?

Wed, 07/30/2014 - 11:43 | 5022817 Pairadimes
Pairadimes's picture

Since, in the 'new normal', this is actually a measure of nominal inflation, I think the number should be higher. Our actual economy is long dead. It just keeps flopping around on the table every time the Fed hits it with the paddles.

Wed, 07/30/2014 - 11:50 | 5022839 walküre
walküre's picture

Inflation explains the increase in personal spending. People spend more but getting less for their money.

Well done, Ben Yellen.. job well done! Fuckers.

Thu, 07/31/2014 - 13:25 | 5027984 papaclop
papaclop's picture

You're right. But those stats have the same value as the crappy products China exports.

Wed, 07/30/2014 - 09:32 | 5022182 toady
toady's picture

Exactly. A completely fabricated number to fit into the jigsaw puzzle TPTB are trying to piece together. 

Wed, 07/30/2014 - 09:44 | 5022242 Took Red Pill
Took Red Pill's picture

97 days until election!

Wed, 07/30/2014 - 10:11 | 5022386 Government need...
Government needs you to pay taxes's picture

See a doctor for elections lasting longer than 4 hours.

Wed, 07/30/2014 - 10:35 | 5022474 danpos
danpos's picture

if quantitative easing should persist, consult a physician.

Wed, 07/30/2014 - 11:51 | 5022846 Raging Debate
Raging Debate's picture

98 days until Q2 revision to -1.8 but see? Need two quarters of negative growth to call it a recession. But it isn't a depression anyways its a Great Recession!

Wed, 07/30/2014 - 15:21 | 5023808 Chief Wonder Bread
Chief Wonder Bread's picture

Fill them dealer lots!!!

"As the economists Amir Sufi and Atif Mian point out in their new book "House of Debt," one of the big factors supporting overall retail spending in the U.S. since 2008 has been the expansion of auto credit. Sufi and Mian don't celebrate this fact -- they rightly see it as a symptom of broader secular stagnation in the U.S. economy.

How long can it last? With residual values faltering, and Fed rates likely to increase, demand for securities backed by bundled auto loans could soon take a hit. Without demand on the securitization side, the ever-expanding pool of auto credit could start to dry up.When the bubble pops, the effect won't simply come in the form of losses on the loans themselves. Rather, as repossessed vehicles flood the market, used vehicle values will drop to the point where they begin to lower new car demand. By juicing short-term sales, automakers and new-car dealers have been robbing from their own futures."

http://www.bloombergview.com/articles/2014-07-29/is-your-car-an-underwat...


Wed, 07/30/2014 - 11:09 | 5022664 GubbermintWorker
GubbermintWorker's picture

Ima gonna buy steaks, instead of stocks, while I can still afford them and put em in the freezer!

Wed, 07/30/2014 - 11:37 | 5022795 studfinder
studfinder's picture

Comrade...chocolate rations will be increased 10%.

Wed, 07/30/2014 - 11:47 | 5022828 thamnosma
thamnosma's picture

Double plus good.  I need some sort of pleasure after joining the anti-sex league.

Wed, 07/30/2014 - 09:22 | 5022135 Deacon Frost
Deacon Frost's picture

Government Goalseeking?

Wed, 07/30/2014 - 09:08 | 5022043 max2205
max2205's picture

What's the Vix on GDP?

Wed, 07/30/2014 - 09:08 | 5022051 FL_Conservative
FL_Conservative's picture

Just keep them baffled with bullshit.

Wed, 07/30/2014 - 09:15 | 5022088 Dick Buttkiss
Dick Buttkiss's picture

Bullshit is what GDP itself is, since it's just a measure of spending, regardless of what it's on.  It could all be on welfare and warfare (which, come to think of it, it almost is), and as long as it was more than the previous quarter, GDP would rise.

Wed, 07/30/2014 - 09:24 | 5022139 insanelysane
insanelysane's picture

We're printing money and spending it on the illegals.  O is actually a genius because with US manufacturing long gone, the only growth industry in the US is in processing, feeding, clothing, sheltering, innoculating, and teaching illegals.  Genius.

Wed, 07/30/2014 - 09:51 | 5022277 Citxmech
Citxmech's picture

One month of Fed market manipulation money would buy every illegal in the US an ivy league education.  Not saying it's not a problem - but in the grand scheme of things, it's a drop in the bucket.

Magician:  "Look over here!  Shiney!"

Wed, 07/30/2014 - 09:04 | 5022031 espirit
espirit's picture

I've just figured out that in the 'New Normal' the GDP actually means INFLATION.

Now it all makes sense.

Wed, 07/30/2014 - 09:11 | 5022068 icanhasbailout
icanhasbailout's picture

It's not like the official policy of the steward of the currency is perpetual debasement or anything.

Wed, 07/30/2014 - 09:28 | 5022157 rwe2late
rwe2late's picture

 No secret there.

Under-reporting the monetary inflation rate

inflates the reported GDP growth rate.

Add in some heuristic and hypothecated service and production and

VOILA !

Wed, 07/30/2014 - 09:56 | 5022302 espirit
espirit's picture

Simply put, the U.S. exports inflation and the GDP reflects that.

I knew I was good at 'something'.

Wed, 07/30/2014 - 09:11 | 5022062 Stoploss
Stoploss's picture

Actually he is a five head, but we'll let it slide today.

Wed, 07/30/2014 - 08:58 | 5021978 Gief Gold Plox
Gief Gold Plox's picture

Only China could fake better GDP.

Wed, 07/30/2014 - 09:21 | 5022124 lester1
lester1's picture

If the economy doing so well why do we still need QE and ZIRP stilulus from the FED ?

Wed, 07/30/2014 - 09:39 | 5022214 Cattender
Cattender's picture

thank God! We're Saved! (by Government Propaganda!) LOL!!!!

Wed, 07/30/2014 - 08:59 | 5021963 PlusTic
PlusTic's picture

In  a word, BULLSHIT...fake as fake can get..this country is so far gone, there's no coming back

Wed, 07/30/2014 - 09:13 | 5022073 iLiquid
iLiquid's picture

You mean BULLISH...?

Wed, 07/30/2014 - 09:17 | 5022095 PlusTic
PlusTic's picture

everyone should flood the commerce dept with emails calling this a fraud:

TheSec@doc.gov

ping these prikks and let'em know we aint all sheeple!

Wed, 07/30/2014 - 10:02 | 5022334 CH1
CH1's picture

flood the commerce dept with emails

C'mon, do you really think they give a shit about emails?

That game is over, my friend. Stop trying to play it. You're wasting your days.

Wed, 07/30/2014 - 10:11 | 5022390 CrashisOptimistic
CrashisOptimistic's picture

Nobody gets up in the morning to go to work and spend all day lying.  They would just find another job.

This is a systemic issue.  Definitions and measurements are arranged to provide desired results.  No one has to lie.  They just have to agree with definitions, and once the definition is embedded in all documents, any new hire reads them and says "oh, okay, that's how I'll do my measurements."

So don't think the building is filled with liars.  They just "do their jobs".

Wed, 07/30/2014 - 10:19 | 5022426 TrumpXVI
TrumpXVI's picture

There's truth to what you're saying, but don't think that any of these people could ever get better jobs....not in this economy.  The people who are making this shit up have the best jobs they are ever going to find right now.

Wed, 07/30/2014 - 10:54 | 5022573 CrashisOptimistic
CrashisOptimistic's picture

There's truth in what you're saying, but systemic changes means you don't have to ask people to lie.

Everyone tolerates some things if they absolutely have to keep that job, but in this case no one steps in their face and says, I don't care what you measure, this is what you will report or you're fired.  That never has to happen.

Wed, 07/30/2014 - 08:58 | 5021967 firstdivision
firstdivision's picture

I am Jacks lack of surprise.  The last print was a setup.

Wed, 07/30/2014 - 09:53 | 5022284 toady
toady's picture

Interesting. I was thinking this print was a setup. Months from now it'll be revised to -2, then some one will realize we've had several quarters of - prints.

You know, like last time.

Wed, 07/30/2014 - 10:14 | 5022399 Government need...
Government needs you to pay taxes's picture

But it will make for excellent political campaign fodder.  Recovery on, Wayne!

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