Second-Quarter U.S. GDP Forecasts Tumble on New Advance Data

(Bloomberg) -- Some forecasts for second-quarter U.S. gross domestic product tumbled after a new report showed weaker inventories and a wider trade deficit in June. 

Economists at JPMorgan Chase & Co. lowered their growth estimate to 1.7 percent from 2.2 percent, while the Federal Reserve Bank of Atlanta’s GDPNow projection declined to 1.8 percent from 2.3 percent. Others issued smaller reductions.

The catalyst was a Census Bureau report Thursday that, for the first time, provided data on wholesale and retail inventories for the last month of a quarter prior to the release of GDP, figures that were previously available only with a one-month lag. The advance numbers will be reflected in the government’s GDP report Friday, rather than forcing the agency to make educated guesses for the missing data.  

The preliminary data from Census showed wholesale stockpiles were little changed in June after rising 0.1 percent the prior month. Retailers had 0.5 percent more goods on hand for a second month. Meanwhile, the trade gap for goods widened 3.6 percent to a four-month high of $63.3 billion, from $61.1 billion in May.

The reading on stockpiles at wholesalers was weaker than the 0.2 percent gain preliminary median forecast of economists surveyed by Bloomberg ahead of the final figures to be issued on Aug. 9. The merchandise trade gap exceeded the projected $61 billion deficit in a survey of 36 economists.

‘Severe’ Correction

“The inventory correction looks severe in 2Q,” and probably subtracted more than a percentage point from GDP last quarter, JPMorgan economist Daniel Silver wrote in a research note. Still, the rundown in stockpiles “should be a positive for growth going forward” as companies look to restock shelves and warehouses, he said.

Others lowering GDP estimates included analysts at Macroeconomic Advisers in St. Louis, who reduced it to 2 percent from 2.3 percent, and their counterparts at TD Securities in New York, where the forecast declined to 2.2 percent from 2.5 percent.

The combined advance estimates for trade and inventories issued Thursday provide a more timely update on inputs to GDP and may improve the accuracy of the growth numbers and limit the magnitude of next month’s GDP revisions.

The world’s largest economy grew at a 2.5 percent annualized rate from April through June, according to the median estimate of 76 economists surveyed ahead of Friday’s release. The updated projections cut it from 2.6 percent.

To contact the reporter on this story: Carlos Torres in Washington at ctorres2@bloomberg.net. To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net, Vince Golle