Q2 GDP report: Final sales to private domestic purchasers falls further. Q2: 1.2% Q1: 1.9% Q4 2024: 2.9% This measure excludes exports, imports, inventories, and govt. Kind of a "core" GDP.

Q2 GDP came in at a 3.0% annual rate. There were massive timing shifts that shifted reported growth from Q1 to Q2. The much better way to look at the data is averaging the two which is a 1.2% annual rate. That is well below the pace in 2024 or the Nov 2024 forecast for 2025-H1.

Finally, I don't think people appreciate just how much re-inflation we've had. Last year core PCE inflation was 2.8%. It was forecasted to fall to 2.2% in the first half of this year, instead it was 3.0% (annual rate).

In sum, in the first half of this year GDP was relatively weak (1.2%) and core inflation was relatively high (3.0%). This is not a catastrophic recession or inflation but it is a cause for serious concern--and a real quandary for the Fed.

Quick new The Budget Lab post breaking down the distribution of the size of income tax cuts under the new tax law *above and beyond extension of existing 2025 law*. From this perspective, close to half of households will see a tax cut of less than $100.

New The Budget Lab tariff analysis incorporating the 25% tariff on India, up from our previously-assumed 10% and which goes into effect August 1. In brief... 1/10

The Budget Lab Consumers face an overall average effective tariff rate of 18.4%, a 16pp increase from 2024 & the highest since 1933. After consumers & businesses shift spending in reaction to the tariffs, the average tariff rate will be 17.5%, a 15.1pp increase & the highest since 1934. 2/10

As US population growth slows, we need to reset expectations for economic data. Payrolls, GDP, expenditures, and income will all grow more slowly now that the immigration surge has ended. That changes how we interpret ... everything. My first piece for Peterson Institute (link follows)

Core PCE inflation comes in 0.26% MM (3.1% annualized) in June, 2.8% YY. Durable goods have risen in price by 1.7% so far year to date. Other than the depths of the pandemic, that's the strongest 6-month rise in PCE durables prices since 1987.

It is once again the case that when you score the OBBBA dynamically it is actually MORE expensive than a conventional score.

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