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Economy in Brief

U.S. GDP Growth Revised Back Up
by Tom Moeller   September 29, 2011

Real GDP growth was revised back up to 1.3% (SAAR) from the 1.0% reported a month ago. The change was powered by a higher estimate of growth in domestic final sales. Consensus estimates had called for GDP growth of 1.2%. The upward revision stemmed mostly from domestic final demand growth to 1.3% from 1.1%. If these numbers seem small, that's because they are. Overall GDP growth has decelerated by roughly one half versus last year, mostly because the rate of inventory accumulation fell and domestic final sales growth remained modest.

Domestic final sales growth was ticked up to 1.3% for Q2 from 1.0% and still was powered by capital investment growth of 10.3%, revised from 9.9%. Yesterday's figures showing strength in orders & shipments of nondefense capital goods bodes well for Q3 growth. Residential investment also was on the mend last quarter and growth was raised to 4.2% from 3.4%. However, that number may turn negative in Q3 based on the monthly readings for housing starts and construction spending already in hand. Personal spending growth was ticked up to a negligible 0.7% for Q2 from 0.4%. The monthly retail and vehicle sales figures suggest nothing better this quarter.

The influences on GDP growth from inventories and foreign trade remained slight for Q2. Inventories may remain that way this quarter but trade showed great improvement during July.

Price inflation was little changed as the chain price index moved to an increase of 2.5%. However, the rates of growth so far this year are double those in 2010.

Profits before taxes without IVA and CCAdj increased a little-changed 0.7% from Q1 and just 1.3% from a year ago. Total economic profits, though, including the inventory valuation adjustment and capital consumption adjustments, gained 3.3% for Q2, the best quarter-to-quarter performance in a year. Growth in nonfinancial industry profits were up 8.1% for the quarter (13.9% y/y). Rest-of-world profits grew 8.4% in Q2 (14.0% y/y) but financial industry profits fell 11.5% (-7.4% y/y).

The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA.

Chained 2005 $, % AR Q2'11 (Final) Q2'11
(Prelim.)
Q2'11
(Adv)
Q1'11 Q4'10 Q2'11
Y/Y
2010 2009 2008
Gross Domestic Product 1.3 1.0 1.3 0.4 2.3 1.6 3.0 -3.5 -0.3
Inventory Effect -0.3 -0.2 0.2 0.3 -1.8 -0.3 1.6 -0.8 -0.5
Final Sales 1.6 1.2 1.1 0.0 4.2 1.9 1.4 -2.6 0.2
Foreign Trade Effect 0.2 0.1 0.6 -0.3 1.4 0.2 -0.4 1.0 1.2
Domestic Final Sales 1.3 1.1 0.5 0.4 2.7 1.7 1.8 -3.6 -1.0
Demand Components
Personal Consumption 0.7 0.4 0.1 2.1 3.6 2.2 2.0 -1.9 -0.6
Business Fixed Investment 10.3 9.9 6.3 2.1 8.0 7.9 4.4 -17.9 -0.8
Residential Investment 4.2 3.4 3.8 -2.4 2.5 -6.8 -4.3 -22.2 -23.9
Government Spending -0.9 -0.9 -1.1 -5.9 -2.2 -2.2 0.7 1.7 2.6
Chain-Type Price Index
GDP 2.5 2.4 2.3 2.5 1.9 2.1 1.2 1.1 2.2
Final Sales of Domestic Product 2.5 2.4 2.3 2.4 1.8 2.0 1.2 1.0 2.2
Final Sales to Domestic Purchasers 3.4 3.3 3.2 3.9 2.0 2.6 1.5 -0.1 3.3
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