US Daily Lowering Our Q2 GDP Growth Forecast

Economics Research 29 July 2026 | 4:04PM EDT

US Daily: Lowering Our Q2 GDP Growth Forecast

n Ahead of Thursday’s advance release of Q2 GDP growth, we are lowering our Q2 Ronnie Walker | GDP growth forecast by 0.8pp to +1.8%, reflecting the incorporation of Goldman Sachs & Co. LLC Tuesday’s trade and inventories data as well as the impact of recent drawdowns Jessica Rindels of the US Strategic Petroleum Reserve (SPR). Our forecast is 0.2pp below | consensus but 0.3pp above the Atlanta Fed’s GDPNow model. Goldman Sachs & Co. LLC

n The disruption to oil flows and sharp increase in oil prices on the back of the Iran War has had a pronounced impact on Q2 activity. US oil exports increased notably following the closure of the Strait of Hormuz, providing a mechanical boost to Q2 GDP growth. But rather than coming from a ramp up in domestic oil production, SPR releases—which are subtracted from GDP growth via lower federal government nondefense spending—contributed to the increase in available US oil. We suspect that the Atlanta Fed’s GDPNow model is not accounting for the impact of SPR releases on federal government spending because the SPR releases are not yet reflected in the source data underpinning the model’s assumption. n Despite a 0.6pp headwind to year-over-year real income growth from the sharp increase in energy prices, we estimate that consumer spending grew a solid 2.3% annualized in Q2. We attribute much of the recent resilience in spending to a 0.7pp boost to year-over-year consumer cashflow growth from larger-than-usual tax refunds as a result of last year’s fiscal package.

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Lowering Our Q2 GDP Growth Forecast

Ahead of Thursday’s advance release of Q2 GDP growth, we are lowering our Q2 GDP growth forecast by 0.8pp to +1.8%. Our forecast is 0.2pp below consensus but 0.3pp above the Atlanta Fed’s GDPNow model.

The downgrade to our forecast reflects two main factors. First, we have incorporated Tuesday’s trade and inventories data from the Advance Economic Indicators report, which indicated a wider trade balance and weaker inventory accumulation than we previously assumed. We now expect net exports to contribute -1.4pp and inventory accumulation to contribute +0.3pp to Q2 GDP growth.

Exhibit 1: We Expect GDP Growth of +1.8% for Q2, 0.2pp Below Consensus but 0.3pp Above GDPNow 2026Q2 GDP Forecasts, QoQ AR Atlanta Fed GS Forecast, Weights 2026Q1 GS Consensus GDPNow 2026 Q4/Q4 Real GDP Consumer Expenditure Business Fixed Investment Equipment Structures Intellectual Property Residential Investment Government Spending Federal State and Local

Contribution from: Net Exports -0.4 -1.4 -1.2 -0.6 Inventories 0.2 0.3 -0.5 0.4

Domestic Final Sales 2.2 2.6 3.1 2.2

Source: Goldman Sachs Global Investment Research, Federal Reserve, Bloomberg

Second, we have incorporated the impact of drawdowns of the US Strategic Petroleum Reserve (SPR).

US oil exports increased notably in Q2 following the closure of the Strait of Hormuz and the resulting decline in oil flows out of the Strait (Exhibit 2, left). This increase in US oil exports was reflected in the trade source data and mechanically boosted our Q2 exports and GDP forecasts sharply as the source data was released—we forecast exports growth of +12.1% for Q2.

But rather than coming from a ramp up in US oil production, the increase in available US oil came primarily from SPR releases (Exhibit 2, right), which are subtracted from GDP growth via lower federal government nondefense spending. We forecast federal government spending growth of -3.5% for Q2.

We suspect that the Atlanta Fed’s GDPNow model is not accounting for the SPR releases because SPR releases do not appear on the Monthly Treasury Statement (MTS) immediately, meaning they are not yet reflected in the source data underpinning the model’s federal government spending forecast. When calculating GDP, the Bureau of Economic Analysis uses SPR data from the Department of Energy (rather than MTS data) to estimate the impact of changes in SPR inventories on…