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Economy in Brief

Real GDP Q2 Growth Revised Little
by Tom Moeller   September 30, 2010

The latest estimate of 1.7% (AR) growth in real Q2 GDP was little revised from last month's 1.6%. Moreover, it differed little from the Consensus expectation for an unchanged reading of 1.6%. It remained the fourth straight quarter of positive GDP growth since the recession's end. However, the 3.0% growth during that period remained less than half the norm for the year following other deep postwar recessions. For the remainder of 2010, growth is expected to average 2.1%, according to a Bloomberg survey.

The contribution to growth from inventory accumulation was little-revised at 0.8 percentage points. The subtraction from growth due to foreign trade deficit deterioration also was little-changed at 3.5 points as exports grew 9.1% (14.1% y/y) while imports gained 33.5% (17.4% y/y).

Growth in domestic final demand was unchanged at 4.3% (AR) as personal consumption grew 2.2% (1.7% y/y). Business fixed investment growth also was little-changed at 17.2% (5.2% y/y). Last quarter's strength was led by a 15.7% y/y surge in equipment spending. Investment in new structures fell 0.5% (-15.6% y/y). The rebound in residential investment also was barely touched at 25.6% (4.9% y/y). Government spending also was little-revised at 3.9%. It reflected a 9.1% rise (4.1% y/y) in Federal government expenditures and a 0.6% gain (-1.6% y/y) in state & local spending.

Corporate profit growth was revised slightly lower to 3.0% (37.0% y/y), remaining the weakest of the last four quarters. Weaker or negative growth across sectors accounted for the slowdown. Nonfinancial sector earnings led last quarter's gain with a 5.7% increase (43.9% y/y) while earnings from abroad nudged up 0.7% (17.4% y/y). Financial sector earnings slipped 1.0% from 1Q but the steep interest rate yield curve kept them up 47.0% y/y.

Price inflation as measured by the chained GDP price index was unchanged at 1.9%. The y/y increase of 0.8% remained near the lowest reading (0.2%) since the early-1950s. The personal consumption chain price index slipped marginally and the 1.9% year-to-year gain remained nearly the quickest since 2008, due largely to higher energy prices. The price index for fixed business investment also slipped q/q (-2.4% y/y) and the residential investment price index fell at a 3.2% rate (-0.5% y/y).

Regulatory Reform Implementation is the title of today's speech by Fed Chairman Ben S. Bernanke and it can be found here.

Chained 2005 $, % AR Q2'10 (Final) Q2'10 (Prelim.) Q2'10 (Adv.) Q1'10 Q4'09 Q2 Y/Y 2009 2008 2007
GDP 1.7 1.6 2.4 3.7 5.0 3.0 -2.6 -0.0 1.9
  Inventory   Effect 0.8 0.6 1.1 2.6 2.8 1.9 -0.5 -0.5 -0.3
 Final Sales 0.9 1.0 1.3 1.1 2.1 1.1 -2.1 0.5 2.2
   Foreign Trade    Effect -3.5 -3.4 -2.8 -0.3 1.9 -0.8 1.0 -1.1 0.7
 Domestic Final  Demand 4.3 4.3 4.1 1.3 0.2 1.9 -3.1 -0.6 1.5
 Personal  Consumption 2.2 2.0 1.6 1.9 0.9 1.7 -1.2 -0.3 2.4
 Business Fixed  Investment 17.2 17.6 17.0 7.8 -1.4 5.2 -17.1 0.3 6.7
 Residential  Investment 25.6 27.1 27.8 -12.3 -0.8 4.9 -22.9 -24.0 -18.7
 Government  Spending 3.9 4.3 4.4 -1.6 -1.4 0.6 1.6 2.8 1.3
 Chained GDP  Price Index 1.9 1.9 1.8 1.0 -0.2 0.8 0.9 2.2 2.9
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