US Q2-2024 GDP GROWTH SECOND ESTIMATE UPPED TO 3.0%
The first advance estimate of US GDP for the June 2024 quarter had been announced by the US Bureau of Economic Analysis (BEA) at 2.8%. Now the updated second estimate of Q2 GDP for the US economy has been further upgraded by 20 bps to 3.0%. It may be recollected that the GDP growth had dipped to 1.4% in the first quarter ended March 2024. In comparison, the second estimate of Q2 GDP growth is a full 160 bps higher. That should come as a sharp rejoinder for the sceptics who are screaming about the US economy hard landing. Apparently, too much has been read into just one month of weak labour data, but the second estimate of Q2 GDP at 3.0% is an affirmation of the fact that the US economy is nowhere near the risk of a hard landing. One can argue that the current GDP in Q2 is still much lower than the 3.4% GDP growth reported by the US economy in Q4FY23 and the record 4.9% GDP growth reported in Q32023.
However, it must be remembered that this is happening on a much higher base; and so, some provision has to be made for the higher base effect. This is still only the second estimate and the final estimate of Q2 GDP will only be out in the end of September. The table below captures the shift between the advance estimate and second estimate of Q2 GDP for year 2024.
Macro Variable | Q2 – Advance Estimate | Q2 – Second Estimate |
Real GDP Growth | 2.8% | 3.0% |
Current Dollar GDP Growth | 5.2% | 5.5% |
PCE Price Index | 2.6% | 2.5% |
Core PCE Index | 2.9% | 2.8% |
Data Source: US Bureau of Economic Analysis (BEA)
If you look at the 20 bps upgrade of the second GDP estimate for Q2-2024 over the first advance estimate, then there have been two favourable factors. Firstly, the nominal GDP is up by 30 bps and secondly, the inflation factor is also lower by 10 bps. In short, growth has been better than expected while the inflation has been lower than expected.
4-FACTOR MODEL – WHAT TRIGGERED NOMINAL GDP GROWTH IN Q2-2024
The table below, breaks up the GDP growth into user end items like private consumption expenditure, private domestic investment, international trade, and government spending to spot the trends of the last 4 quarters.
GDP Data | Q3-2023 YOY (%) |
Q4-2023 YOY (%) |
Q1-2024 YOY (%) |
Q2-2024 YOY (%) # |
Private Consumption Expenditure | 2.4 | 2.5 | 2.7 | 2.6 |
Gross Private Domestic Investment | 0.3 | 2.0 | 3.7 | 6.1 |
Exports | -0.3 | 1.5 | 1.1 | 3.3 |
Imports | -2.7 | -0.1 | 1.5 | 4.9 |
Government Spending & Investment | 4.6 | 4.2 | 2.9 | 3.1 |
Nominal GDP Growth | 5.9 | 5.7 | 5.8 | 5.9 |
Data Source: US Bureau of Economic Analysis (BEA) # = Second Estimate
Here is a quick look at each of the four drivers in the 4 factor model above for nominal growth.
Let us turn to the break-up of GDP in Q2 as compared to the first quarter of 2024 and the four preceding quarters prior to that.
DISSECTING THE Q2 2024 US GDP GROWTH – SECOND ESTIMATE
With the second estimate of Q2-2024 GDP out, there is upgraded data on how the GDP growth has moved in the last 6 quarters on yoy basis and what triggered this move. The first advance estimate of Q2-2024 GDP growth came in at 2.8%, which in itself was 140 bps higher than the final Q1 figure. However, the second estimate of Q2-2024 GDP has further upgraded the GDP growth estimate by 20 bps to 3.0%. A clearer picture will emerge once the third GDP update comes in end September. Here is a quick look at the data.
GDP Data | Q1-2023 YOY (%) |
Q2-2023 YOY (%) |
Q3-2023 YOY (%) |
Q4-2023 YOY (%) |
Q1-2024 YOY (%) |
Q2-2024 YOY (%) # |
GDP Overall | 2.2 | 2.1 | 4.9 | 3.4 | 1.4 | 3.0 |
GDP – Goods | -1.3 | 0.9 | 7.3 | 2.6 | -3.8 | 5.0 |
GDP-Services | 3.2 | 1.9 | 2.9 | 2.8 | 3.0 | 2.5 |
Structures | 8.9 | 7.7 | 10.0 | 10.4 | 9.7 | -0.8 |
Auto O/P | 14.7 | 15.4 | -7.1 | -21.8 | -2.7 | 25.6 |
GDP Ex-Auto | 1.9 | 1.7 | 5.2 | 4.2 | 1.5 | 2.4 |
Non-farm GVA | 1.8 | 2.0 | 5.8 | 3.8 | 1.0 | 3.5 |
Goods Share | -0.4 | 0.3 | 2.3 | 0.8 | -1.2 | 1.5 |
Services Share | 1.9 | 1.1 | 1.7 | 1.7 | 1.8 | 1.5 |
Data Source: US Bureau of Economic Analysis (BEA) – # Second Estimates
What exactly has led to a sharp spike in the GDP growth in Q2-2024 to 3.0% (second estimate), as compared to a tepid level of 1.4% in the sequential first quarter.
Let us now turn to how the personal incomes shaped in Q2-2024; second estimates.
HOW PERSONAL INCOMES SHAPED IN Q2 (SECOND ESTIMATE)
How did the personal incomes compare as per the second estimate for Q2, as compared to the first advance estimate of Q2? Let us start with the macro picture of current dollar GDP (nominal GDP), which increased by 5.5% or by $353.2 Billion to $28.65 Trillion, as per the second estimate of Q2; which is an upward revision of $23.2 Billion compared to the first advance estimate.
Let us now turn to the current-dollar personal income (nominal terms), which saw an absolutely accretion of $233.6 Billion in the second estimate of Q2. This is a downward revision of $4.0 Billion compared to the first advance estimate. The increase in current dollar personal income reflected increases in compensation and personal current transfer receipts.
Let us now move to the disposable personal income (DPI). For Q2-2024 (second estimate), the DPI increased by $183.0 Billion (+3.6%). That is a downward revision of $3.2 Billion compared to the first advance estimate. Real Disposable Personal Income increased by 1.0%, which is absolutely the same as the first advance estimate.
The personal savings in the second estimate for Q2-2024 stood at $686.4 Billion. This is a downward revision of $34.1 Billion compared to the first advance estimate. The personal savings rate (as measured by personal savings as a share of DPI), was 3.3% as per the second estimate of Q2-2024 GDP, which is a downward revision of 20 bps compared to the first advance estimates for the second quarter.
HOW CORPORATE PROFITS PANNED OUT IN THE SECOND QUARTER
Here is a quick update on how the corporate profits of American companies panned out in the second quarter ended June 2024. The profits from current production (corporate profits with inventory valuation and capital consumption adjustments) showed an increase of $57.6 Billion in the second quarter of 2024. In comparison, it may be recollected, that the current production had actually fallen by $47.1 Billion in the first quarter of 2024. Let us now break up the performance of domestic and global businesses of US corporates. The profits of domestic financial corporations increased $46.4 Billion in Q2-2024, compared with an increase of $65.0 Billion in the first quarter of calendar 2024. At the same time, the profits of domestic nonfinancial corporations increased $29.2 Billion, in contrast to a decrease of $114.5 Billion in the first quarter. There is a revival I corporate performance in Q2. ROW profits decreased by $18.0 Billion, in contrast to an increase of $2.3 Billion in the first quarter. In the second quarter, receipts decreased $6.2 Billion, and payments increased $11.8 Billion. Overall, it has been a gratifying corporate season for US corporates.
HOW CME FEDWATCH REACTED TO Q2-GDP SECOND ESTIMATES
The US benchmark 10-year bond yields and the US dollar index tapered post the GDP announcement and that could be because it reduces the probability of aggressive rate cuts by the US Federal Reserve. Here are the CME Fedwatch probabilities.
Fed Meet | 250-275 | 275-300 | 300-325 | 325-350 | 350-375 | 375-400 | 400-425 | 425-450 | 450-475 | 475-500 | 500-525 |
Sep-24 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | 34.5% | 65.5% |
Nov-24 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | 9.8% | 43.3% | 47.0% | Nil |
Dec-24 | Nil | Nil | Nil | Nil | Nil | 4.1% | 24.0% | 44.8% | 27.1% | Nil | Nil |
Jan-25 | Nil | Nil | Nil | 0.6% | 6.8% | 26.7% | 42.5% | 23.5% | Nil | Nil | Nil |
Mar-25 | Nil | 0.1% | 1.3% | 9.2% | 28.6% | 40.2% | 20.6% | Nil | Nil | Nil | Nil |
May-25 | Nil | 1.0% | 7.1% | 23.6% | 37.2% | 25.7% | 5.3% | Nil | Nil | Nil | Nil |
Jun-25 | 0.6% | 4.9% | 17.7% | 32.4% | 29.8% | 12.6% | 1.9% | Nil | Nil | Nil | Nil |
Jul-25 | 2.9% | 10.6% | 24.2% | 31.2% | 22.1% | 7.8% | 1.1% | Nil | Nil | Nil | Nil |
Sep-25 | 6.5% | 15.3% | 26.6% | 28.1% | 17.2% | 5.5% | 0.7% | Nil | Nil | Nil | Nil |
Oct-25 | 10.1% | 18.0% | 27.0% | 25.5% | 14.4% | 4.4% | 0.5% | Nil | Nil | Nil | Nil |
Dec-25 | 12.8% | 19.3% | 26.8% | 23.9% | 12.9% | 3.8% | 0.4% | Nil | Nil | Nil | Nil |
Data source: CME Fedwatch
Here is a quick dekko at how the rate cut probabilities have panned out after the GDP second estimate for Q2-2024.
Will the Fed adhere to such an aggressive tune? That is what we need to keep our fingers crossed about.
FINGERS CROSSED, BUT FED IS UNLIKELY TO OBLIGE
The rate cut path suggested by CME Fedwatch is much more aggressive than the Fed guidance. With labour most likely a flash in the pan and GDP bouncing back in Q2, Fed would be more than cautious about such aggressive rate cuts. Clearly, that is not going to happen and it is starting look more like wishful thinking by the CME Fedwatch. Half the members of the FOMC are still veering towards the hawkish side. Fed does not want an embarrassment where it has to reverse its action. September will give the first clear idea!
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.
Invest wise with Expert advice