Today’s real GDP print of 4.0% real GDP growth for Q2 2014 was sensational.
Unless, of course, you take out private inventory increases.
Of the 4.0% real GDP print, 1.66% was Change in Private Inventory. Subtracting out that number leaves 2.34% real GDP growth. Not bad, but not good.
It is similar to the Q3 2013 real GDP print of 4.5% where Change in Private Inventory contributed 1.49% of real GDP growth, leaving a net real GDP growth rate of 3.01%.
If we didn’t know better, I would say that BEA copied and pasted Q3 2013 to Q2 2014 with modest changes.
The USA had a disastrous Q1 GDP print at -2.9%. It was blamed on ‘the weather’. Oddly, healthcare spending was revised from +1.1% to -0.16% for Q1.
The weather has improved dramatically in Q2 (unless you count the ongoing drought in California and the Texas panhandle area).
But will Q2 GDP rise substantially enough to offset the dismal Q1 -2.9% print? If I use the Citi Economic Surprise Index (a positive reading means that data releases have been stronger than expected and a negative reading means that data releases have been worse than expected.)
Unfortunately, the Citi Economic Surprise Index has been almost uniformly negative since the beginning of Q2 (with the exception of a couple of weeks in May). This does not bode well for Q2 GDP. In fact, the negative surprise index has been below 0 since mid February.
Average hourly wage growth is still stalled at 48% lower than in 2007.
Unless, of course, the Bureau of Economic Analysis massages the numbers and shows a big increase in healthcare spending in Q2. Or other categories such as trade.