Something strange happened yesterday when the Bureau of Economic Analysis released the final estimate of Q2 GDP data: as part of the release, Biden's Dept of Commerce run by Gina Raimondo, which also runs the BEA, reported that GDP in since 2020 had been revised markedly higher .... ... even though banks such as Goldman warned of, and expected, a significantly negative revision to historical GDP numbers.
Fast forward to this week, when Goldman was looking at the same gap, and also at the divergence between various GDP components as reported and their revisions, and also expected that historical GDP would be revised much lower.
What did happen, is that not only was GDI revised sharply higher, effectively closing the record divergence between the two series by boosting various interest income assumptions of GDI. There's more: after the release of today's Personal Income and Spending data, we found just why Goldman was so wrong in its assumption that US GDP should be revised lower based on historical data.
First, as shown in the chart below, personal income was unexpectedly revised about $800 billion higher, as a result of not just an increase in what the government believes was interest and dividend income, but also government handouts and also a $293 billion cumulative increase in wages and salaries.
Spending was also revised higher, if to a lesser extent: the August number for Personal outlays was revised higher by about $350 billion, from $20.38 trillion in July to $20.73 trillion in the revised data, reflecting a reduction in spending on goods offset by much higher increase in spending on services.
To summarize: disposable personal income was revised 3.8% higher to $21.8 trillion, while personal spending was revised higher by about half that, or 1.7%, to $20.7 trillion.
You see, when subtracting the revised personal spending from the revised personal income, what you get is the revised savings of US consumers, which as of today's deus ex revision has almost doubled, rising from $600 billion in July to $1.1 trillion in August!
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