2Q GDP Revised Higher, Salaries and Wages Rise a Strong 7.6%

- Preliminary 2Q GDP rose 2.9% versus estimates of a 3.0% increase and a prior estimate of a 2.5% increase.
- Preliminary 2Q GDP Price Index rose 3.3% versus estimates of a 3.3% gain and a prior estimate of a 3.3% gain.
- Preliminary 2Q Personal Consumption rose 2.6% versus estimates of a 2.5% gain and a prior estimate of a 2.5% gain.
- Preliminary 2Q PCE rose 2.8% versus estimates of a 2.9% increase and a prior estimate of a 2.9% gain.

BOTTOM LINE: The US economy slowed to around long-term average levels in the second quarter, Bloomberg reported. Home construction fell at an annual rate of 9.8% last quarter, the largest drop since 1995. Americans’ salaries and wages rose 7.6%, more than twice the inflation rate and were $100 billion greater than expected. Commercial building investment rose 22.2%, the largest increase since 1994. 2Q GDP grew 6.3% before adjusting for inflation. I still expect US growth to stay around long-term average levels through year-end. There is a 90% correlation between the 10-year yield and core inflation 6 months outs. Moderate US growth and inflation provide the best backdrop for stocks.