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By New_Deal_democrat August 28, 2014 2:09 pm
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Revised 2Q GDP report confirms positivity for now, adds reason for caution about 2015

This morning's revisions to Q2 GDP contained several important new nuggets of information.

 
First, the GDP estimate was actually revised slightly higher, to 4.2% annualzed.  It is also important to note that the Quarterly Services Survey, which will give us a much more accurate look at how Obamacare might be impacting spending on medical services, won't be reported for another couple of weeks, and will only be intergrated into the final report on 2Q GDP next month.  This is the single survey that was responsible for nearly half of the decline of GDP in Q1.
 
Additionally, Gross Domestic Income was reported, up nearly 2%:
 
 
This is the "other side of the accounting ledger" from GDP.  Typically it has been found that any disparities resolve in the direction of GDI rather than GDP.  Even averaging this with the poor Q1 number gives us a slightly better number than the typical quarter in 2013, so this is a good number, confirming that the second quarter really was a major improvement.
 
Finally, on a cautionary note, for the third quarter in a row, neither of the two long leading components of the GDP report, real private residential investment (blue) and corporate profits deflated by unit labor costs (red) made a new high over their Q3 2013 level:
 
 
 Failing to make a new high for a year would put both metrics into potential recession territory.  This is just a caution, though. Note that both failed to make new highs for 3 quarters in 2011.   Other metrics remained very positive at that time. While two other long leading indicators, housing permits and corporate bonds, have also failed to make new highs for approximately that same period of time, both have rebounded close to their most positive post-recession levels. Additionally, real money supply remains quite positive, and real retail sales per capita has paused for the last several months only.
 
The net  result is, this morning's report tells us that we are in good shape for the present, but need to remain cautious about 2015.
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