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Q2 GDP Revision Unexpected Rises On Alleged Jump In Capex To Highest Since 2011

Tyler Durden's picture




 

Following the unexpected surge in Q2 GDP, which beat most analyst estimates, there was widespread expectation that based on real-time data, the revised Q2 print would be worse. So perhaps it is appropriate that the Bureau of Economic Analysis punked everyone once again, when moments ago it released the first revision to the Q2 GDP print, which instead of dropping to the consensus expected 3.9%, it instead rose to 4.2%, up from the 4.0% initial report.

This was driven not by a change in actual spending, the most important driver of the US economy, which was unchanged from the first estimate at 1.69%, but, amusingly enough, by a jump in fixed investment, i.e., CapEx, which rose from 0.3% in Q1 to 0.91% in the first Q2 GDP estimate to 1.25% currently: this is the highest CapEx print since Q4 2011. How is this possible (especially when one excludes Boeing orders)? Nobody knows, unless the BEA now adds stock buybacks to its definition of fixed investment, which as everyone now knows, is where the bulk of corporate free cash flow has been going.

As for inventory, it rose at a slightly lower pace, up 1.39% vs the 1.66% annualized pace reported previously, although on an absolute basis the number was again higher,  and as JPM reports, inventories rose by 84 billion versus the $67 billion JPM had expected, "potentially dragging on Q3."

Finally, the other two components, Net Trade, were largely unchanged at -0.45%, and 0.27% respectively.

All in all this simply means that either the final Q2 GDP revision will be where all the dirt is stuffed in one month, or Q3 GDP will be a reversion to a much lower mean.

 

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Thu, 08/28/2014 - 08:45 | 5153240 Dollarmedes
Dollarmedes's picture

I guess 4.0% wasn't phony enough.

Thu, 08/28/2014 - 08:46 | 5153241 Headbanger
Headbanger's picture

Moar excuse to jack up rates fast!

Thu, 08/28/2014 - 08:49 | 5153254 Bangin7GramRocks
Bangin7GramRocks's picture

We're back baby! USA! USA! USA!

Thu, 08/28/2014 - 08:54 | 5153267 Dollarmedes
Dollarmedes's picture

CapEx increased because of an unexpected jump in orders for fryolators in Canada.

Thu, 08/28/2014 - 10:03 | 5153480 Keyser
Keyser's picture

Bureau of Economic Analysis punked everyone once again

CapEx rising in corporte America? Don't make me laugh, they are too busy with inversion deals to GTFO of the US... 

Thu, 08/28/2014 - 08:46 | 5153242 buzzsaw99
buzzsaw99's picture

hookers and blow

Thu, 08/28/2014 - 10:05 | 5153485 Keyser
Keyser's picture

Ah, the good old days of unlimited corporate CC's... Those were the halcyon days of summer... 

Thu, 08/28/2014 - 13:18 | 5154560 KnuckleDragger-X
KnuckleDragger-X's picture

I think nowadays it's LSD and Japanese blow-up dolls.....

Thu, 08/28/2014 - 08:47 | 5153246 1stepcloser
1stepcloser's picture

see america, you can take on more debt...

 

-From your gloablist bankers

Thu, 08/28/2014 - 08:49 | 5153248 AdvancingTime
AdvancingTime's picture

Does anyone know if the BEA now adds stock buybacks to its definition of fixed investment?

I have not found this information.

Thu, 08/28/2014 - 12:42 | 5154332 IANAE
IANAE's picture

assuming it were so, does the delta QoQ makes sense? 

Thu, 08/28/2014 - 08:48 | 5153249 craus
craus's picture

ES_F is still down! Even with BOJ spiking USDJPY.

That leaves one course of action by Feds, beat the piss out of gold today.

Thu, 08/28/2014 - 09:13 | 5153322 hairInTheSoup
hairInTheSoup's picture

1291 holding as i type

feds not in action yet ?

Thu, 08/28/2014 - 08:52 | 5153259 ZippyBananaPants
ZippyBananaPants's picture

I just sharted.

Thu, 08/28/2014 - 08:57 | 5153275 Brazen Heist
Brazen Heist's picture

They still haven't employed the trick of including some black market activity in GDP like whores and drugs? 

I see they are saving the good tricks for when the going will get tougher. 

The national accounts are subject to the same accounting chicanery as the corporate books, just on a much larger level. 

Thu, 08/28/2014 - 09:00 | 5153280 The Axe
The Axe's picture

Sorry to info you Gartman buy gold...

Thu, 08/28/2014 - 09:41 | 5153284 Hal n back
Hal n back's picture

do not forget the newly added intellectual property came in at 4.4%

 

looks like WMT and TGT willl have to revise sales up to 4% gains, then actually 6% inclusive of inflation. Their accountign systems must really be screwed up. Best Buy and Bed Bath too

 

infact all the retailers plus Cat and Deere.

 

the hits keep coming. It's sad to see our country flame out in this manner.

 

I feel so helpless in the matter. I have written to my elected officials local state and national--get nothing but form letters back.

 

Obviously my problem is I do not contribute enough to their campaigns.

 

 

 

 

 

 

 

Thu, 08/28/2014 - 13:27 | 5154625 JRobby
JRobby's picture

"It's sad to see our country flame out in this manner."

In a swirl of lies that has no beginning or end? 

 

Intelectual property assets, 10 years in development are capitalized in Q2

More GAAP accounting



Thu, 08/28/2014 - 09:02 | 5153289 ms8172
ms8172's picture

This is sooo bullshit... but I'm happy... you're gonna have to raise rates...LMAO!!  

The world is collapsing and convieniently the US has strong numbers.... does anyone understand what lies look like?

Thu, 08/28/2014 - 09:05 | 5153300 FreeNewEnergy
FreeNewEnergy's picture

Suck, fuck. Even if the GDP is 5% for the next two quarters, annual growth will still be under 3%.

-2.9 + 4.2 + 5.0 + 5.0 = 11.3 ÷ 4 = 2.82.

Can the BEA fake it enough to get us to 5%, or maybe 6%, for the third and fourth quarters? Hell, yes.

Will they? Probably not.

I call BS on 2Q, but, let's say they leave it there. The next two quarters are going to be 2.4 and 3.5, which gets us to:

-2.9 + 4.2 + 2.4 + 3.5 = 7.2 ÷ 4 = 1.8% Magnificent.

Bottom line, Fed won't be raising interest rates until well into 2016, if even then.

Thu, 08/28/2014 - 09:25 | 5153349 oudinot
oudinot's picture

Free: Actually Q1 was amended to minus  2.1% from minus 2.9% last month

so -2.1 + yadda yadda = 12.1 divided by 4 =3.025%

Thu, 08/28/2014 - 10:35 | 5153616 FreeNewEnergy
FreeNewEnergy's picture

Thanks for pointing that out. My bad. OK, then, 3.025% it is, with, well, 5% the next two quarters. Ain't gonna happen.

I'll stick to my original estimate that GDP growth for the year will be under 2%.

-2.1 + 4.2 + 2.4 + 3.2 = 7.7 ÷ 4 = 1.925%

Considering all the money thrown at the markets, that's technically a win for the Fed. They've avoided "shrinkage," which is their main concern.

personally, I think GDP growth is just an inane terminology, essentially doesn't mean much. I'm more concerned about inflation/deflation, and I still think deflation is winning. Bumper corn crop this year, means more feed, lower prices for food overall. All the scary headlines about drought and food costs, etc., have been shot to hell. Yeah, the big corps are downsizing products yet charging the same prices, but, anybody buying at full retail is bound to get screwed. Food is still very plentiful in the USA and generally the rest of the world, and isn't that the main concern?

We all gotta eat, and as long as there's sufficient food around at reasonable prices, nobody's going to starve. Any inflation the past few years - outside of certain assets (stocks, mostly) has been tame, which is why the Fed is stuck. I've gotten used to it, but, I'm 60 and have little need to "grow." If I was in my 20s or 30s, I'd love the stock market because making money with a JOB just wouldn't cut it.

Thu, 08/28/2014 - 10:38 | 5153642 FreeNewEnergy
FreeNewEnergy's picture

Thanks for pointing that out. My bad. OK, then, 3.025% it is, with, well, 5% the next two quarters. Ain't gonna happen.

I'll stick to my original estimate that GDP growth for the year will be 2% or under.

-2.1 + 4.2 + 2.4 + 3.5 = 8.0 ÷ 4 = 2.0%

Considering all the money thrown at the markets, that's technically a win for the Fed. They've avoided "shrinkage," which is their main concern.

personally, I think GDP growth is just an inane terminology, essentially doesn't mean much. I'm more concerned about inflation/deflation, and I still think deflation is winning. Bumper corn crop this year, means more feed, lower prices for food overall. All the scary headlines about drought and food costs, etc., have been shot to hell. Yeah, the big corps are downsizing products yet charging the same prices, but, anybody buying at full retail is bound to get screwed. Food is still very plentiful in the USA and generally the rest of the world, and isn't that the main concern?

We all gotta eat, and as long as there's sufficient food around at reasonable prices, nobody's going to starve. Any inflation the past few years - outside of certain assets (stocks, mostly) has been tame, which is why the Fed is stuck. I've gotten used to it, but, I'm 60 and have little need to "grow." If I was in my 20s or 30s, I'd love the stock market because making money with a JOB just wouldn't cut it.

Thu, 08/28/2014 - 13:32 | 5154657 JRobby
JRobby's picture

"I think GDP growth is just an inane terminology, essentially doesn't mean much. I'm more concerned about inflation/deflation"

That would be smart thinking in a foxhole environment which is where we are at. 

Unfortunately, GDP growth, steady GDP growth is required in a debt based monetary system or you end up in a foxhole.

So back to the foxhole.


Thu, 08/28/2014 - 09:10 | 5153307 replaceme
replaceme's picture

seriously, wtf?  when do you believe the numbers - 2 years out?  3?  Q3 is still estimated to be about 1.5, right?  I bought a bunch of defense stuff yesterday, on a whim - come on moar woar!

Thu, 08/28/2014 - 09:18 | 5153337 NoDebt
NoDebt's picture

"unless the BEA now adds stock buybacks to its definition of fixed investment"

CEOs look at buybacks as cap-ex, why wouldn't the government bean counters?

Thu, 08/28/2014 - 09:20 | 5153340 Bernanke'sDaddy
Bernanke'sDaddy's picture

Do escort bookings count?

Thu, 08/28/2014 - 13:42 | 5154719 JRobby
JRobby's picture

Bookings no. When you hand over the cash.

Thu, 08/28/2014 - 09:30 | 5153366 Goldbugger
Goldbugger's picture

They release the cooked numbers and then re-cook and realease again. Where all cooked.

Thu, 08/28/2014 - 09:38 | 5153391 Mike in GA
Mike in GA's picture

This is more about the november elections than anything else.  Remember the fedgov is mostly dhimmicrat.

Thu, 08/28/2014 - 13:41 | 5154713 JRobby
JRobby's picture

Thanks, a step back for a moment does reveal much.

 

Thu, 08/28/2014 - 09:47 | 5153421 Smegley Wanxalot
Smegley Wanxalot's picture

Guess all that Capex demand for the NSA data center expansion to store ever more pieces of info about everyone on the planet is having an effect, because nobody else is investing.

Thu, 08/28/2014 - 10:54 | 5153748 The Merovingian
The Merovingian's picture

As I read the above chart "V" is clearly for Victory ... foarward comrades.

Thu, 08/28/2014 - 11:18 | 5153864 Jano
Jano's picture

GDP based on rigged statistics.

Whats the value of such information?

Thu, 08/28/2014 - 12:02 | 5154042 stant
stant's picture

Us co are borrowing $ to fund day to day. And using thier cash to buy back stock. The rest are gtfo

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