BEA Revises Spending Lower, Income Higher, With GDP Unchanged for 2023 Q2

Economists expected upward revisions to the third estimate of GDP for the second quarter. However, GDP remained unchanged at 2.1 percent, with major revisions elsewhere.

GDP vs GDI Chart Notes

• Real means inflation adjusted
• GDP is Gross Domestic Product
• GDI is Gross Domestic Income
• Real Final Sales is the bottom line assessment of GDP. It excludes inventories which net to zero over time.

Gross Domestic Product, Second Quarter 2023 (Third Estimate)

• Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2023, according to the “third” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.2 percent (revised upward from 2.0 percent).
• Personal Consumption Expenditures rose 0.8 percent, a downward revision from 1.7 percent in the second estimate.
• Current-dollar personal income increased $232.1 billion in the second quarter, a downward revision of $3.9 billion from the previous estimate.
• Current-dollar personal income increased $239.6 billion in the second quarter, an upward revision of $7.4 billion from the previous estimate. The increase in the second quarter primarily reflected increases in compensation (led by private wages and salaries), personal income receipts on assets (both personal dividend income and personal interest income), and personal current transfer receipts (led by government social benefits), and rental income of persons.
• Disposable personal income increased $296.5 billion, or 6.1 percent, in the second quarter, an upward revision of $12.1 billion from the previous estimate. Real disposable personal income increased 3.5 percent, an upward revision of 0.2 percentage point.
• Personal saving was $1.04 trillion in the second quarter, an upward revision in change of $40.5 billion from the previous estimate. The personal saving rate—personal saving as a percentage of disposable personal income—was 5.2 percent, an upward revision of 0.7 percentage point.
• Gross Domestic Income and Corporate Profits Real gross domestic income (GDI) increased 0.7 percent in the second quarter, an upward revision of 0.2 percentage point from the previous estimate.
• The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.4 percent in the second quarter, an upward revision of 0.1 percentage point.

Corporate Profits

• Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $6.9 billion in the second quarter, an upward revision of $17.5 billion from the previous estimate.
• Profits of domestic financial corporations decreased $54.2 billion in the second quarter, a downward revision of $6.3 billion from the previous estimate. Profits of domestic nonfinancial corporations increased $39.0 billion, an upward revision of $21.9 billion. Rest-of-the-world profits increased $22.1 billion, an upward revision of $1.9 billion. In the second quarter, receipts increased $25.8 billion, and payments increased $3.7 billion.

BEA Release Notes

Unlike GDP, advance current quarterly estimates of GDI and corporate profits are not released because data on domestic profits and net interest of domestic industries are not available. For fourth quarter estimates, these data are not available until the third estimate.

2023 First Quarter Revisions

There were a lot of revisions in the third estimate leaving GDP unchanged from the second estimate.

However, there was a major upward revision to GDI to the first quarter. It will be interesting to see how the Philadelphia Fed GDPplus calculation is revised due to the BEA revision.

GDPplus is a blend, not an average of GDP and GDI. It is the single most reliable indicator of recession, by far, subject of course to revisions.

GDP Plus vs Recessions as of 2023 Q2 2nd Revision

GDPplus will be released this afternoon and I will do a follow-up post. The last revision is shown above.

Since 1960, excluding one quarter where GDPplus was -0.1 percent, there has not been any instance where GDPplus was negative for even one month without the economy being in recession or recession starting withing two quarters.

For 2022 Q4 and 2023 Q1 respectively, GDPplus was -1.2 percent and -0.7 percent respectively.

These numbers will change this afternoon.

Should the Fed Declare Defeat and Move On?

With all these revisions, Biden’s clearly inflationary policies , and a jump in oil prices one has to wonder Should the Fed Declare Defeat and Move On?

Meanwhile, ponder this question: The Fed is Uncertain About Uncertainty, So Why the Forward Guidance?