The annual review of the benchmark index (Release) brought substantial changes to the level of reported GDP — but not to the growth rate in the first half of 2022 — while the RDB is revised down slightly while the GDI is revised down. Final sales to private domestic buyers, a measure of domestic demand, revised up and up.
First GDO, in constant dollars:
Figure 1: Gross domestic production (bold black), pre-annual benchmark revision (grey), both in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, BEA via ALFRED, NBER and author’s calculations.
The GDO is down 0.4% and 0.3% q/q annualized in Q1 and Q2 respectively. The relative absence of change in the level is due to compensatory movements in the levels of GDP and GDI:
Figure 2: GDP (bold blue), pre-annual benchmark revision (light blue), GDI (bold red), pre-annual benchmark revision (light red), all in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, BEA via ALFRED, NBER and author’s calculations.
The level of GDP has been raised, while GDI has gone the other way, and is flattening from Q4 2021. This means that the reported gap between GDI and GDP is narrowing to higher levels. normal. The GDP and GDI revision accounted for about half of the revision, as shown below:
Figure 3: Revision of gross domestic production (bold black), contribution due to GDP (beige bar), due to GDI (light blue), all in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, BEA via ALFRED, NBER and author’s calculations.
From Release:
Real GDI is now estimated to have increased by 0.8% in the first quarter (Table 1); in previously published estimates, first-quarter GDI is estimated to have increased by 1.8%. The main contributor to the downward revision was compensation, based primarily on new estimates of wages and salaries from the first quarter of the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages. The average of real GDP and real GDI is now estimated to have fallen 0.4 percent in the first quarter; in previously published estimates, the average of GDP and GDI would have increased by 0.1%.
While the level of GDP is lifted, the recent decline in GDP over the past two quarters remains. It is important to remember that GDP includes inventory accumulation, some of which might be desired, some of which may not. Inventory accumulation can be suppressed to achieve final sales.
Figure 4: Final sales (bold black), pre-annual benchmark revision (grey), both in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, BEA via ALFRED, NBER and author’s calculations.
Final sales (both overseas and domestic) increased in the second quarter, while trending sideways since the second quarter of 2021. Final sales to private domestic buyers—sometimes considered a measure of domestic private aggregate demand — show a similar trend.
Figure 5: Final sales to domestic private buyers (bold black), pre-annual benchmark review (grey), both in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, BEA via ALFRED, NBER and author’s calculations.
Private domestic final sales show a more sustained increase over time, although slowing to 0.2% q/q annualized in Q2.
The main driver of GDP growth is consumption.
Figure 6: Consumption (bold black), pre-annual benchmark revision (grey), both in billion Ch.2012$, SAAR. The NBER has defined peak-to-trough recession dates as shaded. Source: BEA, NBER and author’s calculations.