2Q24 GDP 2nd Estimate: The Power of 3 and Cutting

We update the main GDP deltas in the 2nd est., but a 3.0% line is at the very least a psychological focal point for the market ahead of the FOMC decision.

Aug 29, 2024

I guess it is only a -25 bps cut this time!?

The upward revision of headline GDP does not rattle the UST curve and FOMC handicapping as it underscores a steady economy but with enough negative deltas and PCE inflation moderation to keep calm about the curve.
The reaction of the UST curve to a +3.0% headline GDP rate and +2.9% PCE consumption line was mild, and the downtick in the PCE price index for the quarter (headline and core) takes some of the edge off.
We get July Personal Income and Outlays tomorrow with the latest PCE price index, and that will make for more timely inputs to feed the FOMC followed by the August payroll next week.

The chart above recaps the GDP growth deltas across Personal Consumption Expenditures (PCE), Gross Private Domestic Investment (GPDI, and Government Consumption and Investment. The clear trend driving the uptick to +3.0% was the PCE line bolstered by notable upward revisions in both Goods and Services.

Tempering the PCE moves was the downward revision in GPDI with 5 of 7 still posting growth but the revisions showing 6 of 7 lines revised lower. Only Structures had a positive revision but on a negative growth line. The Government lines declined also for both Federal and State and Local.

For 2Q24, the second estimate saw the headline PCE price index tick lower and the same for Core PCE. Both headline and Core still at least post 2% handles at 2.5% headline and 2.8% core for the 2Q24 period. That is not 2.0% so the debate will continue. We will get the July PCE price index numbers tomorrow.

The above chart offers a longer timeline and wider angle view of the Biden quarters for GDP growth from the rebound year of 2021, into the tightening cycle of 2022, and back into growth mode in 2023-2024. We have looked back across more of these quarters individually in past commentaries (see links at bottom).

At the median by quarter along the major lines, the Biden term has put up better GDP numbers than Bush, Obama, and Trump, but the Clinton and Reagan performance is on a different planet for the overall economic story. Anyone (orange or otherwise) laying claim to the “greatest economy in history” did not even beat the 1980s and 1990s (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

Presidential GDP Dance Off: Reagan vs. Trump 7-27-24

GDP 2Q24: Banking a Strong Quarter for Election Season 7-25-24

State Unemployment: A Sum-of-the-Parts BS Detector 6-30-24

1Q24 GDP: Final Cut Moving Parts 6-27-24

Construction Spending: Stalling Sequentially at High Run Rates 6-4-24

1Q24 GDP: Second Estimate, Moving Parts 5-30-24

1Q24 GDP: Looking into the Investment Layers 4-25-24

1Q24: Too Much Drama 4-25-24

4Q23 GDP: Final Cut, Moving Parts 3-28-24

4Q23 GDP: Second Estimate, Moving Parts 2-28-24

GDP and Fixed Investment: Into the Weeds 1-25-24

4Q23 GDP: Strong Run, Next Question is Stamina 1-25-24