Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  The First Estimate for Q2 Real GDP Growth is 2.1% at an Annual Rate
Posted Under: Data Watch • GDP
Supporting Image for Blog Post


Implications:  Real GDP was stronger than the consensus expected in the second quarter, growing at a 2.1% annual rate.  This is consistent with our projection that real GDP will grow at close to a 3.0% annual rate in 2019 (Q4/Q4).  The details on the second quarter were stronger than the headline, showing that what we call 'core GDP" – real growth in personal consumption, business investment, and home building, combined, grew at a 3.2% annual rate.  Notably, inventories grew at a much slower pace in the second quarter, which was a temporary drag on real economic growth.  Inventories may continue to be a drag on growth into the third quarter but should stop slowing GDP growth by late this year.  In addition, today's report made mincemeat of the idea that the Federal Reserve needs to cut rates or should cut rates at next week's meeting.  Nominal GDP – real GDP growth plus inflation – grew at a 4.6% annual rate in Q2, is up 4.0% from a year ago, and up at a 5.0% annual rate in the past two years, all figures well above the current federal funds rate of 2.375%.  In particular, the GDP deflator, which measures prices for all components of GDP, increased at a 2.4% annual rate in Q2, adding to the list of data that have exceeded expectations since the last Fed meeting in June, including job growth, industrial production, and retail sales.  If the Fed were really data dependent, it wouldn't be discussing a rate cut.  Today's report on GDP was the one time every year that the government goes back and revises data for multiple years.  The most interesting part of this year's changes were a significant downward revision to corporate profits and a similar upward revision to workers' incomes.  However, our capitalized profits models still show that US equities are very cheap and don't suggest a reason to deviate from our year-end projection that the S&P 500 will hit 3250.  The US economy is in excellent shape.  Deregulation and lower tax rates have boosted economic growth and we expect continued healthy growth in the year ahead.  

Click here for PDF version

Posted on Friday, July 26, 2019 @ 11:11 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2023 All rights reserved.