The second estimate of US Q2 GDP showed a slight upward revision compared with the first release. According to the second reading, US GDP grew by an annualized 1.7% Q/Q in the three months to July, up from a first estimate of 1.5% Q/Q. The outcome is exactly in line with expectations. The breakdown shows that the upward revision was mainly based in net exports, as exports rose more than initially forecast (6.0% Q/Q from 5.3% Q/Q), while imports increased significantly less (2.9% Q/Q from 6.0% Q/Q). As a result net-exports contributed 0.32% Q/Q to second quarter GDP, while the first estimate showed a drag of 0.31% Q/Q to Q2 GDP. Also personal consumption was slightly upwardly revised (1.7% Q/Q from 1.5% Q/Q), while the drag from government consumption was more limited than initially expected (-0.9% Q/Q from -1.4% Q/Q). Upward revisions in those components were partly offset by an unfavourable revision in change in inventories. According to the second estimate, inventories shrugged 0.23% Q/Q off GDP, while a positive contribution of 0.22% Q/Q was reported in the first estimate. Overall, the data were slightly stronger than expected due to a significant upward revision in net-exports.
The decline in inventory contribution came as a surprise to us and offset part of the upward revision due to net-exports. However, the mix lower inventories, higher export (demand) is positive for the upcoming momentum of the economy, as firms might need to produce more. Of course, the stronger tenure of exports might be difficult to sustain given the outlook for Europe and Asia, the trade partners.
After falling by 1.4% M/M in June, US pending home sales picked up again in July. On a monthly basis, pending home sales rose by 2.4% M/M, more than the expected 1.0% M/M increase. Regional details show that pending home sales rose in the Northeast (0.5% M/M), Midwest (3.4% M/M) and South (5.2% M/M), while they dropped in the West (-1.7% M/M). Compared with one year ago, pending home sales are up by 15%, providing further evidence that the US housing market is recovering.