The BEA released its second of three estimates for Q2 2016 GDP today. The release came in at +1.1% QoQ SAAR versus +1.22% SAAR in the first reading; that downward revision was bang-on economists’ estimates. The second release gave us an update on corporate profits. After tax, without adjustments to take into account changes in the value of inventories and the consumption of fixed capital, corporate profits bounced from 8.48% of GDP to 8.82%. Over the last two quarters, the measure is up 1.01%, the biggest jump since the 1.03% leap in the two quarters ending Q1 2012. That suggests that the “profits recession” is winding down on an economy-wide basis. However, the lower profit margins sequentially for the broader, most economically relevant definition of profits indicates that it’s not all good news for the corporate sector.
Looking at the revisions to major categories of GDP, consumption was revised up further. It added 2.94% QoQ SAAR to GDP; real consumption grew sequentially at a 4.37% annualized rate in Q2, the second-fastest of the expansion. Upward revision was driven by faster consumption of autos and utilities. There were lots of disappointing revisions as well. Residential fixed investment was revised down 6 bps to -0.30% contribution; the sequential growth rate (-7.7% at an annual rate) was the lowest since 2010. Business fixed investment’s contribution was revised up by 17 bps, with 20 bps of that coming from higher fixed investment in intellectual property products. Trade’s impact on output was revised down, as lower goods exports and higher goods imports reduced the positive impact initially reported in the first estimate of GDP a month ago. Finally, we note that State and Local Government fixed investment contribution was revised down 10 bps, leading to a total contribution downward revision of -11 bps. State and local governments continue to spend less, and that cost a quarter of a point on GDP in total for Q2 per this estimate from the BEA. Below we present a table summarizing this release’s revisions.