Advance Q2 GDP Estimate: U.S. Economic Growth Hits 4.1%

The “advance” estimate for second quarter (Q2) gross domestic product (GDP) pegs U.S. economy growth at an annual rate of 4.1%. The Bureau of Economic Analysis (BEA) also revised Q1 real GDP higher to 2.2%, up from a previously reported 2%.

The initial GDP reading is the strongest since 2014 and puts the annual growth rate on pace not seen in a decade. It’s based on source data that are incomplete or subject to further revision by the source agency.

The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2018.

“If the rest of the quarterly GDP reports for 2018 show similar improvement, it would be reasonable to see Q2 at +4.0%, Q3 at +3.9% and Q4 at +3.7%,” Tim Anderson, Managing Director of TJM Investments, LLC said. “If we actually hit those numbers it would give us GDP growth for 2018 of +3.4%.”

Current-dollar GDP rose 7.4%, or $361.5 billion, to a level of $20.4 trillion in Q2. That’s up from a gain of 4.3%, or $209.2 billion, in Q1.

If the rest of the quarterly GDP reports for 2018 show similar improvement, it would be reasonable to see Q2 at +4.0%, Q3 at +3.9% and Q4 at +3.7%. If we actually hit those numbers it would give us GDP growth for 2018 of +3.4%.

The price index for gross domestic purchases increased 2.3% in Q2, compared with an increase of 2.5% in Q1. The PCE price index increased 1.8%, compared with an increase of 2.5%. Excluding food and energy prices, the PCE price index increased 2.0% juxtaposed to an increase of 2.2%.

Current-dollar personal income rose $183.7 billion in Q2 juxtaposed to an increase of $215.8 billion in Q1.

Disposable personal income increased $167.5 billion, or 4.5%, in Q2, compared with an increase of $256.7 billion, or 7.0%, in Q1. Real disposable personal income increased 2.6%, compared with an increase of 4.4%.

Personal saving was $1,051.1 billion in Q2, compared with $1094.1 billion in Q1. The personal saving rate — personal saving as a percentage of disposable personal income — came in at 6.8% for the quarter, compared with 7.2% in the previous quarter.

Real gross domestic income (GDI) for Q1 was revised higher to 3.9% in Q1, up from a previously reported 3.6%.

“Clearly there are internal details within the report that will be dissected and micro-analyzed throughout the morning,” Mr. Anderson noted. “But the bottom line is the economy grew at 4%-plus in the second quarter, the first time since 2014 that we’ve had a quarterly GDP report with a 4 handle.”

“We now have an annualized GDP of +3.1% for the most recent trailing 4 quarters.”