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Economy in Brief

US GDP Growth Unrevised
by Tom Moeller September 29, 2005

The "final" estimate of US real GDP growth during 2Q was unrevised at 3.3% (AR) and matched Consensus expectations. Downward revisions to foreign trade and inventories were offset by an upward revision to domestic demand growth.

The upward revision to domestic demand growth stemmed from business fixed investment growth to 8.8% from 8.4% (AR, 9.2% y/y) and growth in real PCE which was raised to 3.9% from 3.0% (3.9% y/y). Residential building growth also was raised to 10.8% from 9.8% (6.1% y/y).

Growth in operating corporate profits was reduced to 4.6% from 6.1% (16.0%) following a 5.6% gain during 1Q. Growth in US nonfinancial corporate sector earnings was lowered slightly to 11.5% from 11.9% (23.7% y/y), still the strongest quarterly increase in three years.Profit margin expansion last quarter was the greatest on record.

The positive contribution to GDP growth from a shallower foreign trade deficit was lessened to 1.1 percentage points. Import growth was reduced back to an estimated slight q/q decline (+5.7% y/y) but growth in exports was lowered more to 10.7% from 13.2% (AR, 7.7% y/y).

The negative growth contribution from inventory decumulation was lessened slightly and still was the third in the last four quarters and was the largest since 2000.

The chain price index was revised up to 2.6% as the chain price index for domestic final demand was raised to 3.3% (2.8% y/y).

Why Has Output Become Less Volatile? from the Federal Reserve Bank of San Francisco is available here.

Chained 2000$, % AR 2Q '05 (Final) 2Q '05 (Prelim.) 1Q '05 Y/Y 2004 2003 2002
GDP 3.3% 3.3% 3.8% 3.6% 4.2% 2.7% 1.6%
  Inventory Effect -2.1% -2.0% 0.3% -1.4% 0.3% 0.0% 0.4%
Final Sales 5.6% 5.4% 3.5% 4.2% 3.9% 2.7% 1.2%
  Foreign Trade Effect 1.1% 1.2% -0.4% 0.1% -0.5% -0.3% -0.6%
Domestic Final Demand 4.2% 3.9% 3.7% 4.1% 4.4% 3.0% 1.8%
Chained GDP Price Index 2.6% 2.4% 3.1% 2.5% 2.6% 2.0% 1.7%
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