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Economy in Brief

U.S. GDP Growth is Strengthened
by Tom Moeller  September 26, 2014

The third GDP estimate for Q2'14 indicated growth of 4.6% (AR), revised up from 4.2%. The gain followed a 2.1% Q1 decline and matched expectations in the Action Economics Forecast Survey. Improved estimates of growth in each major final demand category accounted for the improvement.

Business fixed investment growth was increased to 9.7% (6.8% y/y) from 8.4%. Equipment spending grew 11.2% (7.1% y/y). Information processing equipment posted a 26.6% rise (4.0% y/y) and industrial equipment rose 27.3% (14.7% y/y). Spending on intellectual property products improved 5.5% (4.1% y/y). Structures spending jumped 12.6% (9.8% y/y).

Consumer spending growth was unchanged at 2.5% (2.4% y/y), spurred by a 19.1% gain (7.7% y/y) in motor vehicles & parts. Furniture and durable household equipment improved 12.9% (6.8% y/y) and spending on clothing increased 5.6%, little changed y/y. Spending on services improved just 0.9% (1.8% y/y) as growth was restrained by a 3.3% fall (+0.6% y/y) in housing & utilities. Residential building grew at an 8.8% rate (1.2% y/y), revised from 7.2%, and recovered a 5.3% weather-induced decline in Q1. Growth in government spending was raised to 1.7% (-0.7% y/y) from 1.4%. It reflected a 3.4% increase (0.9% y/y) in state & local and a 0.9% dip (-3.2% y/y) in federal government outlays.

A quickened rate of inventory accumulation added an unrevised 1.4 percentage points to growth last quarter. The addition recouped two quarters of inventory liquidation. Deterioration in the foreign trade subtracted a little- revised 0.3 percentage points from growth. An 11.1% rise (3.9% y/y) in exports roughly matched an 11.3% gain (3.8% y/y) in imports.

Price inflation was unrevised. The 2.1% rise (1.7% y/y) in the chain-type price index followed a 1.3% increase in Q1. The acceleration reflected a 2.3% rise (1.6% y/y) in the personal consumption price index. The business fixed investment price index gained 1.2% (1.3% y/y) while the residential investment price index rose 0.7% (5.6% y/y).

Growth in pretax corporate profits was lessened to 6.2% (4.6% y/y) from 8.0% reported earlier. The rise followed a 2.9% Q1 decline that was smaller than reported earlier. Earnings at nonfinancial firms gained 11.9% (2.6% y/y). Financial corporate profits rose 8.0% (-6.3% y/y) and earnings from abroad declined 0.9% (+0.2% 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 in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2009 $, %, AR Q2'14 (Third Estimate) Q2'14 (Second Estimate) Q2'14 (Advance Estimate) Q1'14 Q4'13 Q2 Y/Y 2013 2012 2011
Gross Domestic Product 4.6 4.2 4.0 -2.1 3.5 2.6 2.2 2.3 1.6
  Inventory Effect 1.4 1.4 1.7 -1.2 -0.3 0.3 0.0 0.1 -0.1
Final Sales 3.2 2.8 2.3 -1.0 3.9 2.3 2.2 2.2 1.7
  Foreign Trade Effect -0.3 -0.4 -0.6 -1.7 1.1 0.0 0.3 0.1 0.0
Domestic Final Sales 3.4 3.1 2.8 0.7 2.7 2.3 1.9 2.1 1.7
Demand Components
Personal Consumption Expenditures 2.5 2.5 2.5 1.2 3.7 2.4 2.4 1.8 2.3
Business Fixed Investment 9.7 8.4 5.5 1.6 10.4 6.8 3.0 7.2 7.7
Residential Investment 8.8 7.2 7.5 -5.3 -8.5 1.7 11.9 13.5 0.5
Government Spending 1.7 1.4 1.6 -0.8 -3.8 -0.7 -2.0 -1.4 -3.0
Chain-Type Price Index
GDP      2.1 2.1 2.0 1.3 1.5 1.7 1.5 1.8 2.1
Personal Consumption Expenditures 2.3 2.3 2.3 1.4 1.0 1.6 1.2 1.8 2.5
 Less Food/Energy 2.0 2.0 2.0 1.2 1.3 1.5 1.3 1.8 1.5
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