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Economy in Brief

U.S. GDP Growth Increase Revised Up; Business Investment Grew
by Tom Moeller  September 29, 2016

Economic growth during Q2'16 was revised higher to 1.4% (SAAR, 1.3% y/y) from 1.1% estimated last month and 1.2% in the advance report. A 0.8% gain had been expected in the Action Economic Forecast Survey.

Business fixed investment increased at a 1.0% rate (-0.5% y/y), revised from a 0.9% decline. Structures outlays declined 2.1% (-5.6% y/y), revised from -8.4%. Equipment outlays declined 3.0% (-1.7% y/y), revised from -3.7%. Industrial equipment outlays grew 9.5% (2.5% y/y), revised from 9.1%. Information processing equipment dropped at an unchanged rate of 4.9% (+4.1% y/y). Intellectual property product spending gained 10.4% (5.9% y/y), revised from 8.6%.

The increase in consumer spending was little changed at 4.3% (2.7% y/y). It was the strongest increase since Q4'14. Durable goods purchases jumped at a 9.8% rate (4.8% y/y). Nondurable goods spending gained 5.7% (3.0% y/y). In the services sector, spending increased 3.0% (2.3% y/y).

Residential investment fell at a 7.8% annual rate (+5.7% y/y), an estimate that was little changed and the first decline since Q1'14.

Government purchases declined at a 1.7% annual rate (+0.7% y/y), revised from -1.5%. State & local buying fell 2.5% (+0.7% y/y). Federal government purchases eased 0.4% (+0.7% y/y) as defense spending dropped 3.2% (-0.8% y/y), the same as in Q1.

Inventory investment subtracted a slightly lessened 1.2 percentage points from economic growth. It remained the largest of five consecutive quarterly reductions. The foreign trade sector added a slightly increased 0.2 percentage points to overall economic growth. Exports grew 1.8% (-1.1% y/y) while imports improved 0.2% (0.3% y/y).

The revision was accompanied by the second report on after-tax corporate earnings which showed a 5.6% rise (-1.7% y/y), revised from 4.9%. It was the second consecutive quarter of firm increase. Profits with IVA & CCA adjustments eased 0.6% (-4.3% y/y) as nonfinancial industry earnings declined 4.6% (-7.5% y/y). Foreign sector profits jumped 10.3% (6.5% y/y) while financial sector earnings improved 1.3% (-4.7% y/y).

The GDP price index increased at a 2.3% rate (1.2% y/y), which was revised up minimally. The personal consumption price index increased 2.0% (1.0% y/y), and excluding food & beverages, it rose 1.8% (1.6% y/y). The nonresidential investment price index increased 1.2% (0.5% y/y), while the residential investment price index jumped 5.8% (3.2% y/y). The government sector price index increased 2.7% (0.7% y/y).

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA

Chained 2009 $ (%, AR) Q2'16 (3rd Estimate) Q2'16 (2nd Estimate) Q2'16 (Advance Estimate) Q1'16 Q4'15 Q2'16 Y/Y 2015 2014 2013
Gross Domestic Product 1.4 1.1 1.2 0.8 0.9 1.3 2.6 2.4 1.7
  Inventory Effect -1.2 -1.3 -1.2 -0.4 -0.4 -0.7 0.2 0.0 0.2
Final Sales 2.6 2.4 2.4 1.3 1.2 1.9 2.4 2.5 1.5
  Foreign Trade Effect 0.2 0.1 0.2 0.0 -0.5 -0.1 -0.7 -0.1 0.3
Domestic Final Sales 2.4 2.2 2.1 1.2 1.7 2.1 3.1 2.6 1.2
Demand Components
Personal Consumption Expenditures 4.3 4.4 4.2 1.6 2.3 2.7 3.2 2.9 1.5
Business Fixed Investment 1.0 -0.9 -2.2 -3.4 -3.3 -0.5 2.1 6.0 3.5
Residential Investment -7.8 -7.7 -6.1 7.8 11.5 5.7 11.7 3.5 11.9
Government Spending -1.7 -1.5 -0.9 1.6 0.1 0.7 1.8 -0.9 -2.9
Chain-Type Price Index
GDP      2.3 2.3 2.2 0.5 0.8 1.2 1.1 1.8 1.6
Personal Consumption Expenditures 2.0 2.0 1.9 0.3 0.4 1.0 0.3 1.5 1.3
 Less Food/Energy 1.8 1.8 1.7 2.1 1.2 1.6 1.4 1.6 1.5
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