Friday, July 27, 2012

Real GDP increased 1.5% annual rate in Q2

by Bill McBride on 7/27/2012 08:30:00 AM

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.5 percent in the second quarter of 2012, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent. [revised up from 1.9 percent]

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the second quarter primarily reflected a deceleration in PCE, an acceleration in imports, and decelerations in residential fixed investment and in nonresidential fixed investment that were partly offset by an upturn in private inventory investment, a smaller decrease in federal government spending, and an acceleration in exports.
Overall the revisions to the last three years were pretty minor.

GDP Revision Click on graph for larger image.

This graph shows real GDP before (blue) and after (red) the revision. The recession was not quite as deep as previously reported, and the recovery in 2010 was slightly slower - and the recovery in 2011 slightly faster.

Real GDP in Q1 was slightly above the previously reported level indicating the output gap is about the same as previously estimated.

GDP RevisionThe second graph shows the same data but as a percent change annualized.

There were some downward revisions in Q1 and Q2 2010, and some upward revisions in 2011.

A couple of comments:
• Real personal consumption expenditures increased 1.5 percent in the first quarter, compared with an increase of 2.4 percent in the first.

• Government spending continued to be a drag at all levels, but at a slower pace: The Federal government decreased 0.4 percent in Q2 compared to a 4.2 percent decrease in Q1, and state and local government decreased 2.1 percent compared to 2.2 percent in Q1.

This was above expectations. I'll have more on GDP later ...

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