United States GDP Revised Downwards to 2.1% in Q2 2023

The Preliminary (“second”) estimate of United States GDP for the second quarter of 2023 has revealed that the economy expanded at an annualized rate of 2.1%. This is lower than the 2.4% gain that was predicted last month in the Advanced (“first”) estimate GDP.

In the first quarter of 2023, the US economy expanded by 2.0% according to the figures released by the Bureau of Economic Analysis (BEA).

This latest GDP update indicates that the United States economy remains strong, although there are signs that economy activity has cooled due to the Federal Reserve’s tightening. The economy weakened in the second quarter, with the second GDP estimate pointing to to a decline in consumer spending and decelerations in exports and imports compared to first-quarter GDP.

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Comparing the two estimates of GDP in the second quarter, current-dollar GDP increased by $268.6 billion in the second estimate, revised downward from $304.9 billion in the first estimate. Current-dollar personal income increased $232.1 billion in the first estimate, down from $236 billion in the previous estimate. 

According to the BEA, the second estimate was marked by downward revisions to private inventory investment and nonresidential fixed investment. This was partly offset by upward revisions in consumer spending, exports and imports, and federal and local government spending.

ADP Employment Change posted a weak gain of 177,000 in July. This was down sharply from the June gain of 371,000 which was revised upwards from 324,000. The ADP release is based on payroll data of US businesses and the ADP reading often differ significantly from the official nonfarm payroll release and are not necessarily an accurate guide to nonfarm payrolls. Still, the ADP is carefully monitored, as investors are on the hunt for clues about nonfarm payrolls which is released two days after ADP.

The sharp drop in the ADP release was not a huge surprise, as the consensus estimate stood at 195,000. This is another sign that the US economy is cooling down. Will  nonfarm payrolls follow suit with a weak reading on Friday? The estimate for July nonfarm payrolls stands at 170,000, compared to the June reading of 187,000.

Since the announcement of the United States GDP and ADP employment data, the US Dollar is lower against most of the major currencies. The GBP/USD currency pair is considerably higher at 0.54%, EUR/USD has gained 0.40%, while USD/JPY is unchanged.

The major United States stock markets are yet to open on Wednesday and US index futures are steady. The Nasdaq 100 Futures has risen 3.25 points (0.02%) at 15,419 and S&P Futures are up 2.50 points (0.05%) at 4508.75.

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