Some Weakness is Revised Away in Second Estimate of Q2 GDP

Source: Economics Group of Wells Fargo Bank, N.A.


  • Revised data show the U.S. economy contracted at a 0.6% annualized pace in the second quarter, slightly better than the advance estimate. Upward revisions to underlying demand and a first read from the income side weakens the argument that the economy is currently in recession.
  • Upward revisions were largely tied to consumer spending. Real personal consumption expenditures were revised higher by half a percentage point to an annualized rate of 1.5%. Real final sales to domestic purchasers, an indication of underlying demand, was upwardly revised as a result, but still came in negative contracting at a 0.2% annualized pace.
  • When measured from the income side, real GDI suggests the economy expanded at a 1.4% annualized pace during the quarter. In theory real GDP and GDI should be equivalent, but they rarely are in practice (chart), and the GDI data adds to the argument that the economy is slowing but not yet broadly contracting.