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Q2 GDP 2.1%: Strength in Consumer & Government Spending

Mark Vickery
+2.1% not only brings a "2-handle" where many were expecting a big drop from Q1's 3.1%, but also ekes out a beat over the 2.0% consensus.

Friday, July 26, 2019

Our first look at Q2 Gross Domestic Product (GDP) has been released this mornings, with a headline defying plenty of naysayers: +2.1% not only brings a “2-handle” where many were expecting a big drop from Q1’s 3.1%, but also ekes out a beat over the 2.0% consensus.

Consumption was higher than expected by 30 basis points to 4.3%, way up from Q1’s 1.1% and the best quarterly read in years. This 1.1% read also came from Q1’s Price Index, which zoomed up to 2.4% in Q2. Both these 1.1% figures, by the way, were upwardly revised from the original print of 0.9%. Personal Consumption Expenditures (PCE), which the Fed pays close attention to, missed the 2-handle by coming in at 1.8% for Q2.

We see a capital spending slowdown beneath the headlines, with Structures, Equipment and Intellectual Property (IP) all down. Exports swung to -5% from +4% in Q1 — a clear sign of the effect the trade war between U.S. and China has had thus far. Imports came in mostly in-line with a quarter ago, +0.1%. Trade swung from +0.75% a quarter ago to -0.6% in Q2.

Government Spending was a big contributor to Q2 growth, up 7.9%. State & Local contributed 3.2%. Without digging into the reasons for this, perhaps the new subsidies being doled out to American farmers who’ve been negatively affected by the trade war are accounting for at least some of this.

Q2 Earnings Roundup

Zacks Rank #3 (Hold)-rated Twitter TWTR beat bottom-line estimates by 4 cents to 22 cents per share in its Q2, above the year-ago 17 cents reported. Revenues also topped expectations, posting $841.38 million, up 1.56% from the Zacks consensus, and well beyond the $710.54 million posted in Q2 2018.

This is the first quarter Twitter has excluded reporting Monthly Active Users (MAU), the company still shows growth in Daily Active Users (DAU). What’s more, CEO Jack Dorsey said on the call that Twitter is “moving much faster on health initiatives.” Shares are up 32.6% year to date as of yesterday’s close; they are up another 6+% in today’s pre-market. For more on TWTR’s earnings, click here.

Here are more results from Q2 earnings reports this morning:

https://www.zacks.com/stock/news/450867/mcdonalds-mcd-q2-earnings-lag-estimates
https://www.zacks.com/stock/news/450734/yandex-yndx-q2-earnings-lag-estimates
https://www.zacks.com/stock/news/450816/abbvie-abbv-tops-q2-earnings-and-revenue-estimates
https://www.zacks.com/stock/news/450757/colgatepalmolive-cl-lags-q2-earnings-and-revenue-estimates

Mark Vickery
Senior Editor

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