What to Expect from the GDP Revisions

Tomorrow morning, Friday, July 29, gross domestic product (GDP) data will be released for the second quarter of 2016. The Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce is the U.S. government agency that compiles the GDP data, and in addition to the second quarter data, the BEA will release revised GDP data back to 2013. These revisions happen each year at this time (late July/early August) to take into account revised source data (from the Annual Surveys of Manufacturers, state and local budget data, IRS data on corporate profits, etc.), as well as new or improved data sources that have become available since the last annual update in GDP.

According to the BEA’s blog post on this topic, tomorrow’s update will include revised construction data and better inventory data. The annual revisions also introduce new seasonal factors for the GDP data and its components. As we noted in a recent Weekly Economic Commentary, “GDP Gap,” first quarter GDP has been consistently much weaker than the other quarters of the year; and that suggests, among other things, that there is a problem with the way the BEA adjusts the GDP data for seasonality in the first quarter. The BEA has indicated that it also intends to at least partially address this “residual seasonality” problem in tomorrow’s update.

Every five years or so, the BEA does a comprehensive revision of GDP, going all the way back to 1929. The last one of these comprehensive revisions occurred in 2013 and the next one is set for 2018.

First quarter GDP growth for 2016 now stands at 1.1% and the consensus estimate for the second quarter is 2.7%, leaving real GDP growth in the first half of the year at just under 2.0%. After the revisions, we would expect that real GDP growth for the first half of 2016 would still be around 2.0%, right at the Federal Open Market Committee’s (FOMC) latest forecast for 2016.

As we noted in our recently published Midyear Outlook 2016: A Vote of Confidence, we expect real GDP growth in the second half of 2016 to accelerate into the 2.0-2.5% range, aided by a dollar tailwind, stable oil prices, steady consumer spending, record high household net worth, and a slowing, but still solid labor market.


Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

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