On Thursday morning, the Bureau of Economic Analysis confirmed what we have been writing about for over a month – the first estimates of Q2 GDP came in at -0.93%, far below the +0.50% consensus forecasts. While this was an improvement over Q1’s GDP figure of -1.60%, this is still the second consecutive quarter of negative GDP, and therefore, confirms that we have been in a recession well before July.
When diving deeper into the figures that cause the Q2 change, it is evident that personal consumption has begin to erode, rising only 1% through Q2 after rising 1.8% in Q1 and failing to miss this quarter’s estimate of 1.2%. When broken down further, we find that this consumption entirely rose due to spending on services as opposed to goods. Finally, our GDP is made of up 70% from consumption, and if consumers are beginning to slow their purchases for goods, along with the personal savings rate below pre-COVID levels and at multi-decade lows, this may be the start of much longer recession than many may think.