· U.S.
real GDP growth last quarter improved to 1.9% from 0.9% during 1Q
and from the small decline (revised from a slight increase) during
4Q'07. In addition, growth last year and during 2006 was revised down by
0.2 percentage points to 2.0% and 2.8%. Growth last quarter fell short
of Consensus expectations for a 2.2% rate of increase.
· An improved foreign trade deficit added 2.4 percentage points to GDP growth. That was the largest addition since the third quarter of 1980. Exports grew at a strong 9.2% annual rate. The 10.2% y/y growth rate matched that of the prior three quarters. Growth in imports was negative for the third consecutive quarter at -6.6% (-1.7% y/y) and that was the steepest quarterly rate of decline since the recession year of 2001.
· Inventory decumulation offset much of the addition from trade and reduced 2Q GDP growth by 1.9 percentage points. That was the largest subtraction in three years.
· Growth in final sales to domestic purchasers improved to a still moderate 1.3% from an unrevised 0.1% during 1Q. The y/y growth rate of 0.8% was the weakest since late in 1991.
· Residential construction
continued to weigh on domestic demand as it fell at a 15.6% annual rate
(-22.2% y/y). That decline subtracted 0.6 percentage points from 2Q GDP
growth after single percentage point subtractions during the prior two
quarters.
· Growth in real personal consumption improved modestly, perhaps due to the issuance of income tax rebate checks, to 1.5% (1.3% y/y) from 0.9% growth during 1Q. Spending on autos & light trucks fell at an 18.5% (-9.4% y/y) annual rate but spending on furniture & other household equipment surged at a 13.4% (6.9% y/y) rate. Spending on apparel rose at a 10.3% (3.5% y/y) rate but spending on recreation rose only at a 0.8% (-0.5% y/y) rate. Growth in real PCE added 1.1 percentage points to 2Q real GDP growth after a 0.6% add during 1Q.
· Growth in business fixed investment held steady with 1Q at a 2.3% rate (4.2% y/y). These latest rates of growth are down sharply from 4.9% increases last year and growth above 7.0% during 2006 and 2005. Last quarter, equipment investment fell at a 3.4% (0.1% y/y) rate while structures investment jumped at a 14.3% (12.9% y/y) rate.
· The GDP chain price index grew at a 1.1% rate which was less than half the Consensus expectation for a 2.6% rise. The small increase was due to a 2.2% rate of decline in residential investment prices. The PCE price index grew at an accelerated 4.2% (3.7% y/y) rate.