Second quarter US GDP Wednesday was revised up slightly due to upward adjustments to consumption and residential fixed investment. Analysts will look past this data and toward the third quarter’s likely partial recovery.
Second quarter GDP was revised up to a 31.4% decline from the 31.7% drop in the second estimate. Analysts had expected GDP to be unrevised.
Personal consumption expenditures were revised up to a 33.2% decline from the 34.1% drop in the previous estimate. Goods consumption was revised down to a 10.8% drop from the previously reported 10.6% decline, while services spending was revised up to a 41.8% decline from the previously reported 43.1% drop.
Nonresidential fixed investment was revised down to a 27.2% decline from the 26.0% drop in the advance estimate, but residential investment was revised up to a 35.6% drop from the previously reported 37.9% decline. Rebounds in both sectors are expected in the third quarter, especially for residential investment.
Inventories fell by $287.0 billion in the second quarter, a slight downward revision from the $286.4 billion decline reported in the previous estimate. Business inventories rose by 0.1% in July and are on track to rise in August based on the advance data released on Tuesday.
The net export gap was revised wider to $775.1 billion from the previous estimate of $760.9 billion. The trade gap widened sharply in July and the advance Census gap for August released Tuesday showed a further increase, so the net export gap could grow larger in the third quarter as well.
Government spending was revised down to a 2.5% increase from the previously reported 2.8% gain in the advance estimate.
Federal spending will drop off in the third quarter unless further stimulus measures are passed, while state and local government budgets will be impacted by severely reduced income and sales tax revenues.
The overall GDP price index was revised up to a 1.8% decline from the 2.0% previous estimate, while the core PCE price index was revised up to a 0.8% dip from the 1.0% decline previously reported.
Released earlier on Wednesday, ADP reported an increase of 749,000 private-sector jobs in September, ahead of the 650,000 gain expected by analysts. The key gains were in trade and transportation and the manufacturing sector, though services categories also posted solid gains.
ADP has underestimated gains in the BLS’s private payrolls series over the last few months, so the official government reading is likely to be even stronger.
Also released Wednesday morning, the Chicago PMI rose to 62.4 in September from 51.2 in August, the strongest pace since December 2018. There were gains across the key components.
Other regional manufacturing data have been mixed, but suggest that Thursday’s manufacturing ISM reading will indicate further expansion.