The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis released on Thursday included an annual revision, which in this year's case revised GDP data from first quarter of 2017 through the first quarter of 2022, resulting in revisions to GDP, GDP by industry, gross domestic income, and related components. On a business cycle basis, this report indicates that the overall economic growth rate during the expansion from the second quarter of 2009 through the fourth quarter of 2019 was statistically unchanged from the previously reported growth rate of 2.3%; that during the pandemic induced contraction from the fourth quarter of 2019 through the second quarter of 2020, real GDP decreased at an annual rate of 18.2%, an upward revision 1.0 percentage point from the previously published 19.2% contraction rate, and that during the period of economic expansion from the second quarter of 2020 through the fourth quarter of 2021, real GDP increased at an annual rate of 9.8 percent, an upward revision of 0.2 percentage points from the previously published estimate of growth at a 9.6% rate.

On an annual basis, this report showed that the GDP growth rate for 2017 was at a 2.2% annual rate, revised from the previously reported 2.3% rate, that the GDP growth rate for 2018 was as 2.9%, statistically the same as was previously indicated, that the growth rate of 2019 was similarly unrevised at 2.3%, that the contraction of 2020 was revised from the previously reported 3.4% shrinkage to a contraction rate of 2.8%, and that the GDP growth rate for 2021 was at a 5.9% annual rate, revised from the previously reported 5.7% annual growth rate.. For 2021, that meant that 1st quarter GDP grew at an unrevised 6.3% rate, that the second quarter growth rate was revised from the previously published 6.7% to 7.0%, that the 3rd quarter's GDP growth rate was revised from 2.3% to 2.7%, and that the fourth quarter's growth rate was revised from 6.9% to 7.0%...

Over the 5 year period from the end of 2016 to the end of 2021, personal consumption grew at a 2.6% rate, revised from the 2.4% growth that was previously reported. Total private investment, on the other hand, saw its five year growth rate revised lower, from 4.4% to 4.1%, while exports grew at a 0.6% rate over the period, revised from what was previously reported as a 0.1% contraction rate. Meanwhile, imports grew at a 3.3% annual rate over those 5 years, revised from the 3.2% growth indicated by previous reports, while the growth of government investment and consumption was revised up to a 1.5% rate from the 1.2% rate that had been indicated by reports prior to this revision...

The shrinkage rate of the first quarter of 2022, which had been reported at 1.6% when we reviewed the 3rd estimate of 1st quarter GDP three months ago, remained at a minus 1.6% rate after this revision, as a downward revision to personal consumption expenditures was offset by upward revisions to inventories, to net exports, and to federal, state and local government spending. The first quarter's PCE growth rate was revised from 1.8% to 1.3%, as a downward revision of services growth from 3.0% to 2.1% was only slightly offset by a upward revision in the goods consumption contraction rate from -0.3% to -0.1%. The growth rate of first quarter gross domestic investment was revised from 5.0% to 5.4%, even as the growth rate of fixed domestic investment was revised from 7.4% to 4.8%, as the growth of inflation adjusted inventories was revised from $188.5 billion to $214.5 billion. Meanwhile, the shrinkage of first quarter exports was revised from a 4.8% rate to a 4.6% contraction rate, while the growth rate of first quarter imports was revised from a 18.9% rate to a 18.4% rate...at the same time, the shrinkage of the federal government was revised from a 6.8% rate to a 5.3% rate, while the state and local contraction was revised from 0.5% to 0.4%. Furthermore, the PCE price index for the first quarter was revised from +7.1% to +7.5%, which would almost account for the downward revision to PCE growth by itself....

Those revisions to the 3rd estimate of 1st quarter GDP should leave you with the sense to take even this 3rd estimate of 2nd quarter growth, which was released on Thursday, with a grain of salt. The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services shrunk at a 0.6% annual rate in the 2nd quarter, the same contraction rate that was reported in the second estimate last month, as an upward revision to personal consumption expenditures was offset by downward revisions to inventories and exports. In current dollars, our second quarter GDP grew at a 8.47% annual rate, increasing from what would work out to be a $24,740.5 billion a year rate in the 1st quarter to a $25,248.5 billion annual rate in the 2nd quarter, with the headline 0.6% annualized rate of decrease in real output arrived at after annualized GDP inflation adjustments averaging 9.0% were computed from the price changes of the GDP components and applied to their current dollar change...

As we review this month's revisions to the 2nd quarter, remember that this press release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change that’s compounded by 4 times of that which actually occurred from one 3 month period to the next, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes now chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which are then used as quantity indexes, rather than as any reality based dollar amounts.. For our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 2nd quarter GDP, which you might have to access by using the BEA's main GDP page. Specifically, we’ll be referencing table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2018; table 2, which shows the contribution of each of the components to the GDP change for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the major GDP components...the pdf for the 2nd quarter’s second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 1.5% growth rate reported last month to a growth rate of 2.0% in this estimate. That growth rate figure was arrived at by deflating the 9.5% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 7.3% annual rate in the 2nd quarter, which was revised from the 7.1% PCE inflation rate reported a month ago. Real (inflation adjusted) consumption of durable goods fell at a 2.8% annual rate, which was revised down from the 0.1% decrease shown in the 2nd estimate, and subtracted 0.24 percentage points from GDP, as a 10.3% contraction rate in real consumption of automobiles and parts accounted for the decrease in durable goods growth. Meanwhile, real consumption of nondurable goods by individuals shrunk at a 2.5% annual rate, revised from the 3.7% decrease reported in the 2nd estimate, and subtracted 0.37 percentage points from the 2nd quarter's economic growth, as a 9.9% real decrease rate in consumption of food and beverages purchased for off-premises consumption accounted for all of the 2nd quarter's nondurables drop. On the other hand, consumption of services grew at a 4.6% annual rate, revised from the 3.6% growth rate reported last month, and added 1.99 percentage points to the final GDP tally, with a 16.1% growth rate in real consumption of food services and accommodations accounting for about 35% of the growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 14.1% annual rate in the 2nd quarter, revised from the 13.2% investment contraction reported last month, as real private fixed investment fell at a 5.0% rate, rather than at the 4.5% contraction rate reported in the second estimate, while the previously reported contraction in the inventory growth rate was greater than previously estimated. Real investment in non-residential structures was revised from shrinking at a 13.2% rate to shrinking at a 12.7% rate, while real investment in equipment contracted at a 2.0% rate, an upward revision from the 2.7% contraction rate previously reported.. At the same time, the quarter's investment in intellectual property products was revised from growth at a 10.0% rate to growth at a 8.9% rate, while the contraction rate of residential investment was revised from 16.2% to 17.8% annually. After those revisions, the decrease in investment in non-residential structures subtracted 0.34 percentage points from the 2nd quarter's growth rate, the decrease in investment in equipment subtracted 0.11 percentage points from the quarter's growth, the increase in investment in intellectual property added 0.46 percentage points, while the decrease in investment in residential structures subtracted 0.93 percentage points from the 2nd quarter's GDP growth...

At the same time, the second quarter's growth of real private inventories was revised from the previously reported $83.9 billion in inflation adjusted dollars to show inventories grew at an inflation adjusted $110.2 billion rate. But after revisions, this now came after inventories had grown at a inflation adjusted $214.5 billion in the 1st quarter, and hence the $104.4 billion negative change in real inventory growth from that of the 1st quarter subtracted 1.91 percentage points from the 2nd quarter's growth rate, revised from the 1.83 percentage point subtraction due to lower inventory growth shown in the second estimate. However, since growth in inventories indicates that more of the goods produced during the quarter would have been left in storage or sitting on a shelf, the $104.4 billion reduction in their growth conversely means real final sales of GDP were actually greater by that amount, and therefore the BEA found that real final sales of GDP grew at a 1.3% rate in the 2nd quarter, the sames increase in real final sales that was shown in the second estimate...

Both the previously reported increase in real exports and the previously reported increase in real imports were revised lower with this estimate, but the downward revision to exports was greater, and as a result our foreign trade was a smaller addition to GDP than was reported in the second estimate..Our real exports grew at a 13.8% rate, revised from the 17.6% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 1.51 percentage points to the 2nd quarter's growth rate, down from the 1.88 percentage point addition shown in the second estimate.. Meanwhile, the previously reported 2.8% increase in our real imports was revised to a 2.2% increase, and since imports subtract from GDP because they represent that part off our consumption or investment that was not produced here, their increase subtracted 0.35 percentage points from 2nd quarter GDP, revised from the previous report's subtraction of 0.45 percentage points..Thus, our improving trade balance added a net 1.16 percentage points to 2nd quarter GDP, revised from the rounded 1.42 percentage point addition that had been indicated in the second estimate…

Finally, there were positive revisions to real government consumption and investment in this 3rd estimate, as the entire government sector shrunk at a 1.6% rate, revised from the 1.8% contraction rate previously reported. Real federal government consumption and investment was seen to have contracted at a 3.4% rate from the 1st quarter in this estimate, which was revised from the 3.9% contraction rate reported in the 2nd estimate, as real federal outlays for defense were revised to show growth at a 1.4% rate, rather than the 1.1% growth rate previously reported, and added 0.05 percentage points to 2nd quarter GDP, while all other federal consumption and investment shrunk at a 9.2% rate, less than the 10.4% contraction rate previously reported, and subtracted 0.28 percentage points from 2nd quarter GDP.. Meanwhile, real state and local consumption and investment shrunk at a 0.6% rate in the quarter, which was the same contraction rate reported in the 2nd estimate, and subtracted 0.06% percentage points from 2nd quarter GDP, as state and local investment shrunk at a 8.4% rate and subtracted 0.16 percentage points from GDP, while growth in state & local consumption expenditures at a 1.1% rate added 0.10 percentage points to 2nd quarter. Note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating there was an increase in the output of those goods or services...

Note: the above was first published as part of my weekly synopsis at MarketWatch 666...