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GDP Has Been Confirmed At 2.1% For The Second Quarter; Weekly Jobless Claims Edge Higher

Bruno T
Latest News
September 28 2023 05:09AM

The Gross Domestic Product (GDP) for the second quarter of 2023 in the United States showed an increase of 2.1% when considering the annualized rate, according to the third reading released by the Bureau of Economic Analysis on Thursday, the 28th. There were no revisions compared to the second reading. In the first quarter, the American economy grew by 2%.

Also, inflation in the United States was reported this morning, measured by the core Personal Consumption Expenditures (PCE) price index, which rose by 3.70% in the second quarter, also with no revisions. In Q1 2023, it was 4.90%.

The PCE is one of the key indicators that the Federal Reserve takes into account in its decisions on interest rates.

The headline index was also unchanged at 2.5%, compared to 4.1% in the first quarter.

Additionally, initial claims for unemployment insurance in the past week in the US reached 204,000, below the projection of 215,000 and above the revised previous figure of 202,000.

The number of continuing claims came in at 1.670 million, lower than the projections of 1.675 million but higher than the previous figure of 1.658 million.

US GDP Revised Downward for Each First Quarter from 2020 to 2022

The economic activity in the United States was even weaker or not as strong as previously estimated in each of the first quarters of 2020, 2021, and 2022, amid downgrades primarily in consumer spending, according to revised government data released on Thursday.

However, the Bureau of Economic Analysis (BEA), the government agency that compiles the Gross Domestic Product (GDP) report, said there is no evidence that residual seasonality, which had plagued GDP data for several years, was a problem.

The government adjusts economic data to remove fluctuations, such as seasonal weather patterns and holidays, which typically occur at roughly the same time and magnitude each year, to make the series easier to interpret and analyze. But seasonal effects persisted in some cases even after the data was seasonally adjusted. This was most prevalent in first-quarter GDP data before the government addressed the issue in 2018.

At that time, residual seasonality tended to underestimate first-quarter economic growth.

“We’ve gone through a whole set of protocols and mechanisms that we would check to ensure that we didn’t have any residual seasonality,” said Dave Wasshausen, Associate Director of National Economic Accounts at BEA, to reporters.

“And so, we continue to run all those tests, checks, just to see if there’s any residual seasonality, and there’s not. We haven’t seen anything in particular that would give us pause about persistent components being revised up or down.”

First-quarter 2020 GDP was revised downward to show a contraction at an annualized rate of 5.3%, instead of the previously reported 4.6% pace. But GDP for the entire year of 2020 was bumped up by 0.6 percentage points to show a 2.2% contraction, driven by strong performances in the third and fourth quarters.

In the first quarter of 2021, GDP grew at a rate of 5.2%, instead of the previously published 6.3% pace, with consumer spending revised lower. Full-year growth was reduced from 5.9% to 5.8%, reflecting downgrades in state and local government spending, federal government spending, and non-residential fixed investment.

In 2022, GDP contracted at a rate of 2.0% in the first quarter, revised lower from the previously reported 1.6% pace. Consumer spending, now estimated to be flat instead of growing at a rate of 1.3% as previously reported, was responsible for the decline.

For the full year, economic growth was lowered by 0.2 percentage points to 1.9%, a result of downward revisions in consumer spending, inventory investment, state and local government spending, and exports, as well as an improvement in imports.

The annual benchmark revisions incorporated data from the 2017 Economic Census. The reference year was shifted from 2012 to 2017. The economic picture changed little between 2017 and 2022, with GDP growing at an average annual rate of 2.2%, up from the previously estimated pace of 2.1%.

The COVID-19 pandemic recession continued to be the deepest on record, with the economy contracting at an average rate of 17.5% from the fourth quarter of 2019 to the second quarter of 2020, revised upward by 0.7 percentage points. The recovery was the second-fastest in history.

When measured from the income side, the economy expanded at an average rate of 2.3% from 2017 to 2022. Gross Domestic Income (GDI) was 0.2 percentage points higher than previously estimated.

Some economists focused on the difference between quarterly GDP and GDI rates to argue that the economy was not as strong as recent data suggested.

While the statistical discrepancy was greater in the fourth quarter of 2022, it decreased for the full year, reaching -0.2% of GDP, rather than the previously reported 0.6%. The discrepancy was less than 0.1% of GDP in 2022, revised from 0.6%.

“It’s worth noting that the average statistical discrepancy as a percentage of GDP over the last 50 years is about 0.9%,” Wasshausen said. “And with the updated numbers from 2017 onward, it’s 0.3% or less in each of those three years. So, with this update, we feel very good about where that statistical discrepancy stands.”

Inflation was slightly higher than previously reported in 2022 when the Federal Reserve began raising interest rates. The core Personal Consumption Expenditures (PCE) price index, excluding food and energy, increased by 5.2% last year, revised upward from 5.0%.

The core PCE price index was revised upward in the first, third, and fourth quarters of 2022.