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US Q2 GDP Revised Up to -31.7%

Second quarter GDP was revised up due to upward adjustments to all its components. Even with the small improvement, though, the second quarter reading remains the largest quarterly decline since the Great Depression.

As a result, analysts will look past this data and toward the third quarter’s partial recovery. July data have been generally positive, but a resurgence of COVID cases could dampen the rebound.

Second quarter GDP was revised up to a 31.7% decline from the 32.9% drop in the advance estimate. Analysts had expected a modest upward adjustment to a 32.5% decline.

Personal consumption expenditures were revised up to a 34.1% decline from the 34.6% drop in the advance estimate. Goods consumption was revised up to a 10.6% drop from the previously reported 11.3% decline, while services spending was revised up to a 43.1% decline from the previously reported 43.5% drop.

Non-residential fixed investment was revised up to a 26.0% decline from the 27.0% drop in the advance estimate, while residential investment was revised up to a 37.9% drop from the previously reported 38.7% decline. Both should see rebounds in third quarter, especially the residential sector as record low mortgage rates have fueled sharp demand.

Inventories fell by $286.4 billion in the second quarter, an upward revision from the $315.5 billion decline reported in the advance estimate.

Increased production could help inventories rebound later in the third quarter, though not in July. Early readings for July retail and wholesale inventories will be released on Friday and are expected to decline again due to brisk sales, while durable goods inventories reported on Wednesday fell by 0.5%.

The net export gap was revised narrower to $760.9 billion from the advance estimate of $780.7 billion, still reflecting the global shutdown’s negative impact on exports and imports. The first estimate of the July census goods trade gap will be released on Friday.

Government spending was revised up very slightly to a 2.8% increase from the previously reported 2.7% decline in the advance estimate.

Federal spending will drop off in the third quarter unless further stimulus measures are passed. At the same time, the reduction in income and sales tax revenues will have a negative impact of state and local government budgets for some time.

The overall GDP price index was revised down to a 2.0% decline from the 1.8% advance estimate, while the core PCE price index was revised up slightly to a 1.0% dip from the 1.1% decline previously reported.

In other data released on Thursday, initial jobless claims fell by 98,000 to 1.006 million in the August 22 week, above the 987,000 level expected and following an increase to a 1.104 million level in the previous week.

On the upside, the four-week moving average fell by 107,250 to 1.068 million in current week, a fourth straight decline. The average is likely to slip further next week as the 1.191 million level in the August 1 week rolls out of the equation.

Unadjusted initial claims fell by 107,250 in the current week, compared with seasonal adjustment expectations for a small increase. The state data showed declines in most states, including Florida and Texas, but a large increase in California. The impact of Hurricane Laura on the Gulf Coast state will be seen in next week’s data.

The Labor Department announced that they are changing their seasonal adjustment process beginning with next week’s data from multiplicative to additive to better deal with the sharp increase in the levels of the series this year due to COVID-19. See the box on this website ( for more information.

Continuing claims fell by 223,000 to 14.535 million in the August 15 employment survey week, down sharply from 16.951 million in the July 18 survey week and positive sign for another payrolls gain in next Friday’s data.

Kevin Kastner

Julie Ros

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