Will The US GDP For Q2 Be Revised Lower?

August 29, 2019

By Orbex

The US Department of Commerce will be releasing the second revised estimates for the second quarter GDP today.

Estimates point to a possible further slowdown in the period ending June 2019.

According to the economists polled, the second-quarter GDP is expected to rise only 2.0% on the year. This marks a downward slump from the initial estimates which projected a 2.1% increase in the quarter ending June 2019.

U.S. GDP Q2
U.S. GDP, Q2 – Preliminary Estimates

Overall, the US economy posted a sharp slowdown from the first quarter. In the three months ending March 2019, US GDP grew 3.1%. However, it declined significantly into the second quarter. This was primarily due to slower investments during the period.

In the preliminary report, the data showed that the gross domestic investment fell 5.5%. This was the worst performance since the fourth quarter of 2015.


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The core personal consumption expenditure, which is the Fed’s preferred gauge of inflation, rose by 1.8% during the period.

Today’s revised GDP report is only going to further strengthen the case for the Federal Reserve to cut interest rates once again. In July, after lowering rates by 25 basis points, the central bank said that it was only a mid-cycle adjustment.

Thus, it stopped short of confirming that there would be further rate cuts down the line. However, the markets look to have a different take. The expectations for further rate cuts are rising.

Currently, investors expect the Fed to lower rates by another quarter-point in the September meeting. A weaker revised GDP report will, no doubt, strengthen the case.

US GDP Lagging Behind IMF Forecasts

Despite the revisions, the second-quarter GDP is still expected to fall in below the forecasts given by the International Monetary Fund.

The IMF, in a report released late July, noted that the US economy would growth 2.6%, on the year in 2019. This was a slight upward revision from the estimates it gave just a few months before.

However, given the current global conditions, it is unlikely that growth in the United States would be able to rise towards the set target.

Trade wars have led to an uncertain environment. And that coincides with the late business cycle. The global economy has been in a steady expansionary mode for more than a decade. This has led to concerns of a possible impending recession on the horizon.

As a result, the current narrative of the inverted yield curves has sent investors into a panic mode. But so far, it seems that the global economy still has some room to grow. Having said that, the evidence is certainly building that momentum is slowing.

This is evident from the decline in the manufacturing sector, not just in the United States and China, but also in other regions such as the eurozone and Japan.

Not Much Fresh Data to Go By

After the preliminary release, there haven’t been that many reports covering the second quarter of the year.

The US wholesale inventories report showed an unchanged print for June. Sales fell 0.3% during the month while the ratio of inventories to sales remained unchanged as well.

However, construction spending for June was disappointing. Spending in the construction sector fell the most in seven months, by 1.3% during the period. This follows a revised 0.5% decline in May this year.

The trade balance for June showed a deficit of $55.2 billion. This was down by $0.2 billion from the month before.

Considering the above, it is quite likely that the GDP figures for the second quarter could be revised lower or, at best, stay unchanged. This will potentially confirm the view that growth momentum is slowing.

By Orbex