The second quarter GDP numbers wrongfooted some City economists, who wrongly thought that exceptionally weak business investment figures for the quarter, released on Thursday, would produce a downward revision to the figures.
Top marks to Ben Broadbent and Kevin Daly of Goldman Sachs, who wrote this on Thursday: “Note that this number has NO bearing on tomorrow’s revised estimate of Q2 GDP. At this stage, and for the next year, estimates of last quarter’s growth depend solely on sectoral output data (manufacturing, services, construction, etc). To the extent the aggregate expenditure differs from this output-based estimate (they should in principle be exactly the same), the ONS will adjust inventory investment to bring the first into line with the second.”
As it was the GDP fall in the second quarter was revised from 0.8% to 0.7%. The main implication of the business investment figures is that they reduce the potential gains from the inventory turnaround later, though the figures will almost certainly be revised. But we should still be on course for growth in Q3.
Originally published at David Smith’s EconomicsUK and reproduced here with the author’s permission.