- Q1 final was -1.4% annualized
- Consumer spending +1.1% vs +1.8% prior
- Consumer spending on durables -2.6% vs +5.9% in Q1
- GDP deflator +8.9% vs +7.9% expected
- Core PCE +4.4% vs +4.5% expected
- GDP ex motor vehicles -1.0%
- GDP final sales % vs -1.2% in Q1
- Business investment +9.2% vs +2.9% in Q1
- Full report
The miss appears to be largely driven by higher inflation dragging down real growth. The deflator at 8.9% took a whole percentage point off the headline compared to what was expected.
More details:
- Exports +18.0%, imports +3.1%
- Business investment -0.1% vs +10.0% in Q1
- Investment in equipment -2.7%, IP +9.2%
- Home investment -14.0% vs +0.4% in Q1
Percentage point changes:
- Inventories cut 2.01 pp
- Goods cut 1.08 pp
- Services added 1.78 pp
- Gross private domestic investment -2.73 pp
- Net exports +1.43 pp
- Government spending -0.33 pp
Inventories were a major drag in Q2 and were also a drag in Q1. Net exports saved this from being a worse report but that will be tough to repeat going forward given the strength in the dollar.
In terms of markets, bad news is good news to some extent. Soft GDP has further dragged the odds of a 75 bps hike in September to 22%.
