Lucky for the hardlanders yesterday. Yesterday’s GDP report was full of upward revisions.
Some hard-liners have argued that GDP, which measures output, and gross domestic income (GDI), which measure economic activity through wages and profits, have widened over the past few quarters. was expected to be revised downward.
Over time, the GDI closely tracks GDP, but when the economy is slowing down, the discrepancy tends to correct in favor of a weaker indicator.
Yesterday, an update from the Bureau of Economic Analysis (BEA) showed that the GDI was actually undervalued. The increase in income led to the upward revision of the valuation.
The previous estimate of real GDP for the second quarter showed that real GDP increased by 3.0% (Searle) and real GDI increased by 1.3%. This created the largest gap between the two sides since 1993.
BEA’s final estimate for Q2 real GDI was raised to 3.4%. Q1 GDI was also revised upwards from 1.3% to 3.0% (graph). Real GDP growth remained at 3.0% in the second quarter, but was revised slightly upwards to 1.6% in the first quarter.
Furthermore, the technical recession caused by the second consecutive quarter of negative real GDP growth in the first half of 2022 has been corrected.
Comparison of real GDP and real GDI
Much of the increase in GDI was due to increases in workers’ compensation. Growth in real disposable personal income was raised from 1.0% to 2.4% (graph).
personal disposable income
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