How Inventory and Trade Distorted Q1–Q2 Growth

The US releases revised second quarter GDP data. The market consensus is for no change (given data quality problems, “no change” in the details may be unlikely). US growth has been distorted this year—export and inventory data swung wildly between the first and second quarters. Unfortunately, the fiction of annualization assumes that what happens in a quarter, however unique, is continually repeated. This exaggerates first quarter weakness and second quarter strength.