Below is a breakdown of this morning’s Q2 GDP release, which came in at +4.1% — weaker than expected but still strong nonetheless. Consumption was much stronger thanks in part to lower withholding taxes in paychecks, but that one-time growth bump won’t carry forward to later quarters. Expect strong, but much less robust, consumption growth going forward. Trade was also a huge boost to overall GDP, adding 1.1% to growth in Q2. Soybeans especially, but other crops in general, helped push up exports as sellers rushed goods overseas to beat tariff deadlines. That will likely move the other direction in Q3. Government added to growth but not dramatically, a reasonable pace that may fall a bit but doesn’t look out of line. Fixed investment was notably slower in Q2 than Q1. While still contributing a very healthy 0.9% in Q2, the fall is worth keeping an eye on, especially given slowing leading indicators for capital expenditures from business. Finally, inventories plunged, dragging down growth by 1% QoQ SAAR. Inventories look ridiculously low, and can’t continue to subtract from GDP at the pace they have been over the last few years.

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