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Economy in Brief

U.S. GDP Growth Of 1.3% Disappoints
by Tom Moeller  July 29, 2011

The Commerce Department reported that real GDP grew just 1.3% (SAAR) last quarter. The figure was disappointing for several reasons. It fell short of Consensus expectations for 1.7% growth and it was the softest reading since Q2'09. Moreover, the gain followed a downwardly revised 0.4% in Q1 and the components showed widespread weakness. As if that wasn't enough, GDP fell a revised 3.5% during the recession year of 2009, nearly one percentage point more than earlier indicated.

Weakness in consumer spending continued to head the list of soft GDP components as it ticked up just 0.1% last quarter. Government spending, down 1.1%, followed with its third consecutive quarterly decline. It was paced by lower state & local purchases. Business investment continued to be the economy's bright spot and it grew 6.3%, though growth did lag its double-digit pace during much of last year. Finally, surprise-surprise, residential investment grew 3.8%, one of four positive quarters since 2005.

Inventories added negligibly to growth here in 2011. Moreover, the lessened rate of inventory building versus last year accounts for roughly two-thirds of the slowdown in GDP growth. Foreign trade had a small positive effect on growth last quarter as exports grew 6.0% (7.9% y/y) and imports rose 1.3% (4.7% y/y).

As for price inflation, the numbers for last quarter and Q1 remained much stronger than during 2010. That mostly reflects a pickup due to higher energy prices but revisions also showed more of a recent gain than reported earlier; to 2.4% versus 2.0%.

The latest GDP figures can be found in Haver's USECON and USNA databases. The government's pre-revision figures are contained in the USARC11 database. Consensus estimates can be found in AS1REPNA.

The Foreclosure Crisis in 2008: Predatory Lending or Household Overreaching? from the Federal Reserve Bank of St. Louis is available here.

Chained 2005 $, % AR Q2'11
(Adv)
Q1'11 Q4'10 Q2'11
Y/Y
2010 2009 2008
Gross Domestic Product 1.3 0.4 2.3 1.6 3.0 -3.5 -0.3
Inventory Effect 0.2 0.3 -1.8 -0.1 1.6 -0.9 -0.5
 Final Sales 1.1 0.0 4.2 1.7 1.4 -2.6 0.2
 Foreign Trade Effect 0.6 -0.3 1.4 0.2 -0.4 1.0 1.2
Domestic Final Sales 0.5 0.4 2.7 1.5 1.8 -3.6 -1.0
Demand Components
Personal Consumption 0.1 2.1 3.6 2.1 2.0 -1.9 -0.6
Business Fixed Investment 6.3 2.1 8.7 7.0 4.4 -17.9 -0.8
Residential Investment 3.8 -2.5 2.5 -6.9 -4.3 -22.2 -23.9
Government Spending -1.1 -5.9 -2.8 -2.2 0.7 1.7 2.6
Chain-Type Price Index
GDP 2.3 2.5 1.9 2.0 1.2 1.1 2.2
 Final Sales of Domestic Product 2.3 2.4 1.8 2.0 1.2 1.0 2.2
 Final Sales to Domestic Purchasers 3.2 3.9 2.0 2.5 1.5 -0.1 3.3
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