from the bond blog, Across the Curve:
GDP in Q2 declined less than expected in Q2 at -1.0percent versus the consensus forecast of -1.5 percent.
Revisions to prior period data show that the economic contraction was deeper than originally reported with the YOY change -3.9 percent versus an expectation of something closer to -3.0.
The biggest disappointment in the data is the consumption slice which showed that consumption fell 1.2 percent in the quarter after rising 0.6 percent in the previous quarter.
Here are some thoughts from FTN Financial economist Chris Low on consumption and GDP:
The drop in consumption in Q2 was a disappointment, because it is the one important piece which does not fit the bottoming-out narrative. And, it’s a very important piece. Cash for Clunkers will boost consumer spending in Q3, however, and the pattern of the monthly consumption data suggests the quarterly changes of the last two quarters were flukes. Real consumption is essentially trending sideways. Still, trending up would be nicer. As long as consumption is flat or falling, there will be doubts about the sustainability of any economic recovery.
