US GDP Growth Revised Down To 2.1% In Q2; Exports, Inventories Decline In The Quarter

The United States gross domestic product (GDP) growth came in at 2.1% in the second quarter of 2023, lower compared to the second advance estimates of 2.4%. Notably, the economy grew at a slower pace than predicted. The GDP was revised down owing to a decline in exports and private inventory investments. However, the economy inched sequentially against the 2% growth rate recorded in the first quarter.

As per the official data, the increase in real GDP reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, and federal government spending that were partly offset by decreases in exports, residential fixed investment, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

However, compared to the Q1 of 2023 data, the acceleration in real GDP in the second quarter primarily reflected a smaller decrease in private inventory investment and an acceleration in nonresidential fixed investment.

The US Bureau of Economic Analysis said these movements were partly offset by a downturn in exports and decelerations in consumer spending and federal government spending. Imports turned down.

Exports experienced the largest decline since the aftermath of the COVID-19 outbreak in Q2 2020 (-10.6% vs. 7.8% in Q1), and residential fixed investment slumped for the ninth consecutive period (-3.6% vs. -4.0%). Additionally, private inventory investment had a negative contribution to the GDP, Trading Economics said.

Further, the current-dollar GDP increased 4.1% at an annual rate, or $268.6 billion, in the second quarter to a level of $26.80 trillion, a downward revision of $36.3 billion from the previous estimate. The price index for gross domestic purchases increased by 1.7% in the second quarter, a downward revision of 0.2 percentage points from the previous estimate.

Also, the PCE price index increased 2.5% a downward revision of 0.1 percentage point. Excluding food and energy prices, the PCE price index increased by 3.7%, a downward revision of 0.1 percentage point.

The country's current-dollar personal income increased by $232.1 billion in the second quarter, a downward revision of $3.9 billion from the previous estimate. The increase primarily reflected increases in compensation (led by private wages and salaries), personal income receipts on assets (both personal interest income and personal dividend income), personal current transfer receipts (led by government social benefits), and rental income of persons.

While personal savings stood at $892.3 billion in the second quarter, an upward revision of $22.7 billion from the previous estimate. The personal saving rate-personal saving as a percentage of disposable personal income-was 4.5% in the second quarter, an upward revision of 0.1 percentage point.

In the case of gross domestic income and corporate profits, the real GDI increased by 0.5% in the second quarter, in contrast to a decrease of 1.8% in the first quarter. Also, profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased by $10.6 billion in the second quarter, compared with a decrease of $121.5 billion in the first quarter.

Additionally, the official data revealed that the profits of domestic financial corporations decreased by $47.8 billion in the second quarter, compared with a decrease of $9.4 billion in the first quarter. Profits of domestic nonfinancial corporations increased $17.1 billion in the second quarter, in contrast to a decrease of $102.9 billion in the first quarter. Rest-of-the-world profits increased $20.2 billion in the second quarter, in contrast to a decrease of $9.2 billion in the first quarter. In the second quarter, receipts increased by $18.2 billion and payments decreased by $2.0 billion.