Strategas Research on today’s GDP report (plus chart):
The headline real GDP data were “OK,” showing a 1.5% q/q annual rate for the second quarter … The key question is what “muddle through” growth means for profits, since profits are a leading indicator. These GDP numbers are consistent with a small increase in profits in 2Q (since compensation was restrained), but that follows a contraction in 1Q. So, profits now look to have been roughly flat for 3 quarters. Another way to put this is that we still are in a very sluggish nominal GDP environment, with nominal GDP up at just a 3.1% q/q pace and 4% y/y. All companies report their results and pay their workers in nominal dollars.