Q2 GDP Beats Expectations As Historical GDP Data Revised

Tyler Durden's picture

US Q2 GDP printed at an annualized rate of 1.5%, just slightly above expectations of 1.4%, and a 25% drop from the Q1 rate of 2.0%, with personal consumption plunging as a key contributor from 1.72% to just 1.05%, and government once again being less and less a detractor from "economic growth." Inventories "added" 0.32% to GDP, a number which in Q3 GDP will subtract from economic "growth." Now whether this headline number is bad enough for the Fed to decide on more QE, is up to Hilsenrath to decide. But in a Bizarro world in which only horrible data boosts the market, today's modest beat will likely not make the market happy, nor sellers of newsletters in which the only strategy is hope and prayer. And just as important, today the BEA revised historical GDP data retroactively. Of note 2010 GDP was revised from 3.0% to 2.4%, while Q3 2011 GDP was revised from 3.0% to 4.1%, indicating that the slowdown we are experiencing is in fact far worse than previously expected. It also shows that HFT trigger buying or selling on GDP data is completely meaningless as today's data will be revised violently higher or lower in a year, making it completely irrelevant.

Q2 GDP breakdown:

Historical revisions:

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Hype Alert's picture

A politically correct number.  This takes pressure off Bernanke to goose the market before the election.  We get to limp along for a little while longer.

It may be good for the economy, but it's bad for QE hopes.  Will this undo the Hilsenrat rally?  If 65% of QE3 is priced in, then it should be priced out.  At least until we get to the final numbers.

spastic_colon's picture

translation......QE not coming

the not so mighty maximiza's picture

I agree, only game changer is if Euro Union implodes and/or WWIII in middle east. 

fonzannoon's picture

The economy is in a depression. Take away the massive stimulus and we would be 50% lower across the board.

Now that we know QE is out for August we can look at data and earnings. Draghi threw himself in front of the steamroller first. But it's more like the Austin Powers steamroller scene.

The markets are gonna force Ben's hand too.

ihedgemyhedges's picture

"The markets are gonna force Ben's hand too."

Poor Ben, I understand.  My wife's lack of interest forces my hand too.....

CVfriendship's picture

Take away the ongoing massive stimulus, we'd be in year 4 of deleveraging and perhaps a lot healthier looking forward... BUT we can't let markets go down, far.

Id fight Gandhi's picture

This will make a case for QE3 much more difficult.

firstdivision's picture

Markets can easily crash 20% in a week or less.  Banks collude for profit.  The case will be made easily enough.

JackT's picture

I can only assume that QE3 will not be happening.  Even the talking heads are saying it won't work. 

AlaricBalth's picture

Good is bad and bad is good. This whole system needs to be rebooted.

I actually remember the days when the markets would cheer a better than expected or in line with expectations GDP number. But alas thanks to the financialization of our economy, the masters of the universe need more and more just to keep the charade going. We need someone like Paul Volcker at the Fed who is not afraid to slap some bankers and politicians around. Bernanke is an empty suit.

Lohn Jocke's picture

If a good number is bullish, and a bad number is bullish... what is a neutral number?


qussl3's picture

Missed a T and misspelled mate.

goldfish1's picture


these numbers are meaningless

not too many brilliant minds in gubmint

timbo_em's picture

Since it was a headline beat nonetheless, is Goldman going to re-re-re-revise their GDP estimate?

firstdivision's picture

The switch has been turned to OFF. 


Someone is hitting all offers on SPA10.

dvsteenk's picture

lowering the "benchmark" expectations to beat has done the trick again...

Jlmadyson's picture

Going to be fun Fall! How about them QE hopes now?

Though in the end I see Q2 coming down a half percent when all said an done. So closer to 1% final revision.

Inventories are going to totally screw Q3 not to mention the rate of decline we are coming in at now.

ECRI still right on the money.

JustObserving's picture

How can you have such massive revisions to the historical GDP data?  US economc figures are like the weather now.  Don't like them - wait, wait, they will change.

Haager's picture

Wether QE or not - But frome where or from whom will the market get the needed hopium --- Draghi? 

RobotTrader's picture

QE is not coming.


The market is strong enough to rise on its own, with only occasional "Pie-Holing" from Bernanke and Draghi to keep things steered in the correct direction.

That explains the miserable action in the gold stocks, which are already pricing in $1,000 gold prices later this year.

Sometimes the market is simply tired of going down, too much pessimism and negativity with AAII bears up at 43%, eventually things turn around on their own and then becomes a "perpetual motion machine" of higher stock prices = more jobs = better economy.

the not so mighty maximiza's picture

".....higher stock prices = more jobs = better economy."

Sure Robo...sure.........

dvsteenk's picture

is that a causal mechanism?

"higher stock prices = more jobs = better economy"

I thought it was the other way around: better economy = more jobs = higher stocks...

RSloane's picture

Don't confuse him, he's still trying to work out what GDP means.

dwdollar's picture

"Sometimes the market is simply tired of going down, too much pessimism and negativity..."

And sometimes cancer patients are tired of having cancer... but that doesn't mean the problem magically goes away.

MeelionDollerBogus's picture

QE is CLEARLY coming.

Draghi said it and that means Bernanke HAS to follow and so must China.

The longer QE is away, the more money to be made short on markets now.

Once the QE is in it's time to go long FAS, SPY, JNJ, RSU, JNK and GLD, taking profits with options in each, buying gold bullion with those profits on a regular basis.

This year looks to be flat for gold - barring the 52-week see-saw model I have yet to produce & publish - and that means right now LOAD THE BOAT on gold bars.

Gold will never be lower than 1450/oz ever again in all history EVER. My 277-week model shows gold may POSSIBLY hit 1490 at the lowest of all possible lows Oct or Dec.

dvsteenk's picture

next time we'll discuss the number to beat will be GDP -0.1%

it will come in at 0%, a 100% better than expected

... and sign of an improved economy, according to RoboTrader

AU5K's picture

Revising figures from 4 years ago... really?

asteroids's picture

GDP report from BLS is probably made up, just like their employment numbers. Ignore it. Watch the credit market for the actual interpretation.

SoNH80's picture

1.5 percent... if the GDP deflator aka inflation is off by 1.5 percent, our growth rate is, the Dean Wormer's immortal words, "ZERO point ZERO."  If it's off by more than that.... I'd say that a conservative estimate of actual inflation is roughly 2 percent above what the government says it is.  Stagflation.  Where's my checkered bellbottoms?

adr's picture

The massive inventory fudge in Q4 2011 destroyed the economy moving forward. Unprecedented levels of inventory was produced for 2012 that still hasn't been sold. Real sales are half what they were last year.

The GDP calculation is a compete joke. It can be made to any number the masters please. Just like Facebook's earnings yesterday. They had to beat by a little, but really just match expectations.

Don't listen to the guys at the top. They have proven they will lie, cheat, and do whatever I necessary to keep themselves in power. If that means fudging their corproations numbers by 25% or more, it will be done.

Listen to the guys at the bottom. Listen to retail store managers, and corporate buyers. They know the real story. The real story is retail sales, outside cars, are down over 50% from last year. Through six months less inventory has been sold than the first three months of last year.

Best Buy still has inventory of TVs and other appliances that came in January. New models that were supposed to come in May, still haven't come into stores. Sporting Goods sales are down 45% across the board, with some categories down 75%. Don't believe Under Armour's numbers, it is all channel stuffing desperate retailers hoping something will sell. I have it from the source that most of this is guranteed sale merchandise, meaning if it doesn't sell UA must take it back.

In fact the only way to get buyers to take products right now is to offer generous terms and guaranteed sale. Retailers are pushing credit terms past 120 days. In business we are calling this "net never". If your product doesn't sell out in 90 days, you are taking the inventory back.

Wall Street is the Johnson administration during the Vietnam War. The soldiers call for support because they are being attacked, but command in Washington tells them that by their statistics every Vietcong is dead. No support will be sent.

So are you going to listen to the talking heads getting flawed information from the top, or the soldier on the ground?

JackT's picture

...queue deflation

RSloane's picture

This determines that our economy is growing by which first graders, and why are they in charge of the economy?

FRBNYrCROOKS's picture

I am just wondering when the smartest guys in the, FOMC, room will shank his/her compadres and go short without getting permission from Br9ke. Are they waiting to herd in as many retail investors as possible before they pull the plug? The only result of unsustanability is that it cannot be sustained? I have been waiting since October 3rd, 2011 for the ponzi to unravel but, the music keeps playing. The fiscal cliff is a pack of lies considering the House passed HR 5856, an Appropriations bill for 608 billion dollars, for continued funding of the war in Afghanistan. The whole fiscal cliff fallicy is just a election year political ploy. The Gov't has no intention of, meaningful, spending cuts, the FRBNY is buying 88% of all Treasury debt and as RP pointed out, during his grilling of Geithner this week, we even get to pay commisions to the Primary Dealers so the FRBNY can buy Treasury debt.

When asked by Ron Paul "Wouldn't it be more cost effective and less of a burden on the taxpayer if the FRBNY bought Treasury Debt directly from the Treasury and avoid unnecessary payment of Primary Dealer commisions?", Geithner responded " that would violate the FRBNYs mandated prohibition from financing Gov't spending." I don't know if anyone, truly, understood the underlying implications of Geithners idiotic rational and the psychopathic mania of such logic but, the depravity of his statement was not lost to me. If I were Ron Paul I would have simple asked, just like in eight grade "douche bag said what?" and let Giethner responde " pardon me Dr. Paul? Where Paul could have responded "fartlicker pardons what"? Dr. Paul missed his oppurtunity to utilize one of his oldest skill sets honed and prefected on the playgroud, but not practiced, in many years. Opportunity wasted! Since Dr. Paul is retiring I thought it the perfect moment for some real work to be completed.

Snakeeyes's picture

BARELY beat expectations. And the economy is decelerating.

Way to go Soetoro!


pc_babe's picture

At this rate, we will finally learn in 2015 that we actually slipped back into reciession in 2012.  All Hail Barry

bnbdnb's picture

Anyone know where the 1.5% is coming from?

durable good are negative, imports>exports


I don't get it.

cebri88's picture

Just before the elections, how handy. 

joebren's picture

QE I + QE II + TWIST = 1.5% GDP