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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