The Downward GDP Revisions Have Begun
The headline figures looked good - imports for consumer goods were all up.
But analysts found the unexpected surge in the gap was actually more the reflection of flagging exports, which shrank 0.2%.
As a result, many firms have begun to revising their GDP estimates downward.
Here's the count so far:
- Goldman Sachs: Q2 GDP revised down to 3.4% from 3.8%; Q1 GDP revised down to -1.1% from -0.9%.
- Barclays: Q2 GDP revised down to 2.9% from 3.0%
- Macroeconomic Advisers: Q1 GDP revised down to -1.4% from -0.9%.
"Makes you wonder if GDP will rebound to 3% in the second quarter let alone the 4% whisper numbers," Bank of Tokyo-Mitsubishi's Chris Rupkey mused in a note. "Trade data had its annual revision so the widening was not as bad as it looks but trade will be a drag on second quarter GDP."
Not everyone believes the data will have a material impact on growth. JP Morgan held firm on its estimate for Q2 GDP of 3.0%, though they added the new trade data "adds some modest downside risk" to that forecast.
Capital Economics also left its Q2 GDP estimate unchanged, arguing that the flagging trade data is surpassed by jumps in sales and inventories. They also mention Wednesday's solid ISM non-manufacturing survey reading. "A weighted average of the two ISM activity indices is now consistent with a rebound in annualized GDP growth to around +3.0% in the second quarter from -1.0% in the first," CE said. "We still think it could be closer to 3.5%."
The next major piece of the GDP puzzle will come Friday when we get non-farm payrolls for May. Estimates are for a reading of 213,000, down from 288,000.