Friday's 2.4% GDP was enough of a stunner (and a plunger after the majorly upward revised Q1 GDP data), that it sent the market pretty much straight line higher ever since, now that QE is virtually guaranteed, as the Fed completes the circle and confirms that Einstein's definition of idiocy is nowhere more evident than in the Marriner Eccles building. So the fact that as JPM's Michael Feroli notes, the real Q2 GDP is actually 1.7% after revised data on non-durable goods, should have long sent stocks at least 1% higher for the day instead of the observed meandering in slightly red territory, has left the Zero Hedge staff scratching its head.
The assumption that the Bureau of Economic Analysis had made regarding factory inventories in their initial estimate for Q2 GDP was a bit off the mark, and it now appears that growth last quarter was closer to 1.7%, rather than the 2.4% reported last Friday. (Of this downward revision, 0.1%-point came in yesterday's construction report).
Inventories at manufacturers of nondurable goods decreased around $4 billion in June, rather than increasing $1 billion as BEA had assumed. As a result, it now appears economy-wide nonfarm inventories increased at a $55 billion annual rate last quarter, and stcokbuilding contributed 0.5%-point to GDP growth, rather than the 1.1%-point initially reported.
With the implied revisions, second quarter growth is now looking especially soft. On the brighter side, the prospect of a big inventory overhang weighing on third quarter production -- which loomed large in the initial estimate -- now appears less threatening.