Q2 GDP fell 1%, .5% better than expected but the breakdown was very mixed as NOMINAL GDP fell more than expected as the deflator rose just .2% vs expectations of a gain of 1%. If the deflator was in line, REAL GDP would have fallen 1.8%. Personal consumption dropped 1.2%, .7% more than the consensus and which makes up a large majority of GDP. Inventories took .8% off GDP, down from the sharp 2.4% pull in Q1. Net exports added 1.4% after adding 2.6% in Q1. Real final sales, which takes out the impact of inventories, fell .2%, a sharp improvement from the decline of 4.1% in Q1 and 4.7% in Q4. Government spending added 1.1% to GDP. Residential construction fell 29.3%, non residential structures fell 8.9% and spending on equipment and software fell by 9%, much slower than the decline of 36.4% in Q1. Bottom line, we are set up for an improvement in inventories and trade but consumer spending still remains in question.

Category: MacroNotes

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One Response to “Q2 GDP, thanks for the deflator”

  1. [...] spending was fell 1.2% in the 2Q, down from a gain of 0.6% in the 1Q. And, as Peter Boockvar pointed out, the GDP deflator was much smaller than expected, yielding a smaller [...]