The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis released last week included an annual revision, which in this year’s case revised GDP data from first quarter of 2019 through the first quarter of 2024, resulting in revisions to GDP, GDP by industry, gross domestic income, and related components.  On a business cycle basis, this report indicates that the overall economic growth rate during the expansion from the second quarter of 2009 through the fourth quarter of 2019 was revised to 2.4%, up from the previously reported growth rate of 2.3%; that for the pandemic induced contraction from the fourth quarter of 2019 through the second quarter of 2020, real GDP decreased at an annual rate of 17.5%, the same contraction rate as had been previously published, and that during the period of economic expansion from the second quarter of 2020 through the first quarter of 2024, real GDP increased at an annual rate of 5.2 percent, 0.3 percentage points higher than the 4.9% growth rate that was previously estimated.

On an annual basis, this report showed that the GDP growth rate for 2019 was at a 2.6% annual rate, revised from the previously reported 2.5% rate; that the GDP contraction rate for 2020 was at 2.2%, statistically the same as was previously indicated; that the growth rate of 2021 was revised to 6.1% from the 5.8% rate previously reported, that the growth rate of 2022 was revised to 2.5% from the 1.9% rate previously reported, and that the GDP growth rate for 2023 was at a 2.9% annual rate, revised from the previously reported 2.5% annual growth rate, with quarterly growth rates over those five years concurrently revised.   For 2023, that meant 1st quarter GDP grew at a 2.8% rate, revised from the 2.1% growth rate reported a month ago, that the second quarter’s growth rate was revised from the previously published 2.1% to 2.4%, that the 3rd quarter’s GDP growth rate was revised from 4.9% to 4.4%, and that the fourth quarter’s growth rate was revised from 3.4% to 3.2%…

Over the 5 year period from the end of 2018 to the end of 2023, personal consumption grew at a 2.8% rate, revised from the 2.6% growth that was previously reported over that period.  Total private investment also saw its five year growth rate revised higher, from 2.0% to 2.6%, while exports grew at a 0.9% rate over the period, revised from what was previously reported as a 0.6% growth rate…meanwhile, imports grew at a 2.5% annual rate over those 5 years, revised from the 2.2% growth indicated by previous reports, and the growth of government investment and consumption was revised to a 2.1% rate from the 2.2% rate that had been indicated by reports prior to this revision…

The growth rate of the first quarter of 2024, which had last been reported at 1.4% when we reviewed the 3rd estimate of 1st quarter GDP three months ago, was revised to a 1.6% growth rate after this revision, as an upward revision to consumer spending was only partly offset by downward revisions to private inventory investment and to residential fixed investment, In addition, the price index for gross domestic purchases was revised to 3.0 percent, from 3.1%, which thus contributed a rounded 0.1 percentage point to the upward revision of real 1st quarter growth…

The first quarter’s PCE growth rate was revised from 1.5% to 1.9%, on a upward revision in the real goods consumption contraction rate from –2.3% to –1.2% and on a upward revision of real personal services growth from 3.3% to 3.4%. At the same time, the growth rate of first quarter gross domestic investment was revised down from 4.4% to 3.8%, as fixed domestic investment was revised from growing at a 7.0% rate to growing at a 6.5% rate, while the quarter’s inflation adjusted negative change in inventory growth was revised from -$26.3 billion in 2017 dollars to -$26.9 billion in 2017 dollars.  Meanwhile, the growth of first quarter exports was revised from a 1.6% rate to a 1.9% growth rate, while the growth rate of the first quarter imports was unrevised at a 6.1% rate. In addition, the growth of the federal government's consumption and investment was revised from a -0.2% contraction rate to a -0.4% contraction, while the state and local growth was revised from a 3.0% rate to a 3.1% rate.  The PCE price index for the first quarter was unrevised at +2.5%….

Those revisions to the final GDP readings of the past five years, and to the 3rd estimate of 1st quarter GDP, published as “final” just three months ago, should leave you with the sense to take even this 3rd estimate of 2nd quarter growth, which was released on Thursday, with a grain of salt. The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.0% annual rate in the 2nd quarter, the same growth rate that was reported in the second estimate last month, as downward revisions to personal consumption expenditures, to fixed private investment, and to net exports was offset by upward revisions to inventories and to government.  In current dollars, our second quarter GDP grew at a 5.60% annual rate, increasing from what would work out to be a revised $28,624.1 billion a year rate in the 1st quarter to a $29,016.7 billion annual rate in the 2nd quarter, with the headline 3.0% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 2.5% were computed from the price changes of the GDP components and applied to their current dollar change...

As we review this month’s revisions to the 2nd quarter’s data, remember that the GDP press release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change that’s compounded by 4 times of that which actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2017, and then that all percentage changes in this report are calculated from those 2017 dollar figures, which are then used as quantity indexes, rather than as any reality based dollar amounts.  For our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 2nd quarter GDP, which you can access by using the BEA’s main GDP page. Specifically, we’ll be referencing table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2020; table 2, which shows the contribution of each of the components to the GDP change for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the major GDP components.  The pdf for the 2nd quarter’s second estimate, which this estimate revises, is here…

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.9% growth rate reported last month to a growth rate of 2.8% in this estimate. That growth rate figure was arrived at by deflating the the 5.4% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 2.5% annual rate in the 2nd quarter, which was unchanged from the PCE inflation rate reported a month ago. Real (ie, inflation adjusted) consumption of durable goods grew at a 5.5% annual rate, revised from the 4.9% growth rate reported in the 2nd estimate, and added 0.40 percentage points to GDP, as real consumption of motor vehicles, recreational goods and vehicles, and furniture and appliances all contributed solidly to the durable goods increase. At the same time, real consumption of nondurable goods by individuals grew at a 1.7% annual rate, revised from the 2.0% increase reported in the 2nd estimate, and added 0.23 percentage points to the 2nd quarter’s economic growth, as growth in consumption of groceries, gasoline and other nondurables more than offset a modest decrease in personal consumption of clothing.  Meanwhile, consumption of services grew at a 2.7% annual rate, revised from the 2.9% growth rate reported last month, and added 1.27 percentage points to the final GDP tally, as a 3.1% growth rate in real consumption of health care accounted for about 40% of the growth in services…

At the same time, seasonally adjusted real gross private domestic investment grew at a 8.3% annual rate in the 2nd quarter, revised from the 7.5% investment growth reported last month, as real private fixed investment grew at a 2.3% rate, revised from the 3.0% growth rate reported in the second estimate, while real inventory growth was somewhat greater than previously estimated.  Real investment in non-residential structures was revised from shrinking at a 1.6% rate to growing at a 0.2% rate, while real investment in equipment grew at a 9.8% rate, revised from the 10.8% growth rate previously reported. Meanwhile, the quarter’s investment in intellectual property products was revised from growth at a 2.6% rate to growth at a 0.7% rate, while the contraction rate of residential investment was revised from -2.0% to -2.8% annually.   After those revisions, the increase in investment in non-residential structures added 0.01 percentage points to the 2nd quarter’s growth rate, the increase in investment in equipment added 0.49 percentage points to the quarter’s growth, the increase in investment in intellectual property added 0.04 percentage points, while the decrease in investment in residential structures subtracted 0.11 percentage points from the 2nd quarter’s GDP growth…

Meanwhile, the second quarter’s change real private inventories was revised from the previously reported $69.0 billion in inflation adjusted dollars to indicate inventories grew at an inflation adjusted $71.7 billion rate.  That came after inventories had grown at an inflation adjusted $17.7 billion in the 1st quarter, revised from the $28.6 billion 1st quarter growth reported previously, and hence the $53.9 billion positive change in real inventory growth from that of the 1st quarter added 1.05 percentage points to the 2nd quarter’s growth rate, revised from the 0.78 percentage point addition due to greater inventory growth shown in in the second estimate, when the quarterly change in real inventory was shown at $40.3 billion..  However, since growth in inventories indicates that more of the goods produced during the quarter would have been left in storage or “sitting on the shelf”, the $53.9 billion increase in their growth means real final sales of 2nd quarter GDP were smaller by that amount, and therefore the BEA found that real final sales of GDP grew at a 1.9% rate in the 2nd quarter, revised from the 2.2% rate of increase in real final sales shown in the second estimate…

The previously reported increase in real exports was revised lower with this estimate, while the previously reported increase in real imports was revised higher at the same time, and as a result the negative impact of our foreign trade on GDP was greater than in the second estimate.  Our real exports grew at a 1.0% rate, revised from the 1.6% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.12 percentage points to the 2nd quarter’s growth rate, down from the 0.17 percentage point addition shown in the second estimate.  Meanwhile, the previously reported 7.8% increase in our real imports was revised to an 8.4% increase, and since imports are subtracted from GDP because they represent an addition to either consumption or investment that was not produced domestically, their increase subtracted 1.01 percentage points from 2nd quarter GDP, revised from the second estimate’s subtraction of 0.94 percentage points.  Thus our deteriorating trade balance subtracted a net rounded 0.90 percentage points from 2nd quarter GDP, revised from the rounded 0.77 percentage point subtraction that had been indicated in the second estimate…

Finally, there were also revisions to real government consumption and investment in this 3rd estimate, mostly on the Federal side, as the entire government sector grew at a 3.1% rate, revised from the 2.7% growth rate previously reported.  Real federal government consumption and investment was seen to have grown at a 4.3% rate from the 1st quarter in this estimate, revised from the 3.3% growth rate reported in the 2nd estimate, as real federal outlays for defense were revised to show growth at a 6.4% rate, revised from the 4.9% growth rate previously reported, and added 0.23 percentage points to 2nd quarter GDP, while all other federal consumption and investment grew at a 1.5% rate, up from the 1.2% growth rate previously reported, and added 0.04 percentage points to 2nd quarter GDP.  Meanwhile, real state and local consumption and investment grew at a 2.3% rate in the quarter, which was the same growth rate reported in the 2nd estimate, and added 0.25 percentage points to 2nd quarter GDP growth, as state and local investment grew at a 4.5% rate and accounted for 0.09 percentage points of that addition.  Note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating there was an increase in the output of those goods or services.