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Economy in Brief

U.S. GDP Growth Is Unrevised; The Economy Continues to Increase at a Moderate Pace
by Tom Moeller  September 26, 2019

Economic growth slowed in the second quarter at an unrevised 2.0% rate. The figure matched expectations in the Action Economics Forecast Survey. Last quarter's increase compared to a 3.1% rise in the first quarter. GDP growth slowed during the last year to 2.3% from its recent peak of 3.2% during the four quarters ended Q2'18.

Growth in corporate profits before-tax with IVA & CCA adjustments was lessened to 3.8% (1.3% y/y) from 5.3%. The gain followed two quarters of decline. Domestic industry profits declined 1.1% y/y as nonfinancial earnings also fell 1.1% y/y. Earnings in the financial sector declined 3.8% y/y but profits earned abroad rose 8.7% y/y. After-tax earnings rose 3.3% (0.3% y/y), the first rise in three quarters.

Nonresidential fixed investment declined 1.0% (2.6% y/y) after a 4.4% Q1 rise. Growth in structures investment was revised to -11.1% (-4.8% y/y) from -9.4% while equipment investment was revised to 0.7% (+2.7% y/y) from 0.8%. Growth in intellectual property products investment was little-changed at 3.7%, and y/y growth of 7.5% compared to 9.6% in Q1.

Growth in personal spending also was lessened to a 4.6% surge (2.6% y/y) from 4.7%. That strengthening followed two quarters of modest rise. Spending on durable goods remained firm at an unrevised 13.0% (4.4% y/y). Strength was driven by a 16.1% advance (1.9% y/y) in motor vehicle outlays. Nondurable goods outlays were revised lower to 6.5% (3.5% y/y) from 6.8%. Spending on services was unrevised at 2.8% (2.1% y/y). Recreation outlay growth was strong at 6.4% (2.3% y/y).

Offsetting these downward revisions was an upward revision to government spending growth to 4.8% (2.3% y/y) from 4.5%. Outlays by the federal government grew 8.3% (3.6% y/y), revised from 8.1% as nondefense expenditures surged 16.1% (1.9% y/y). State & local government expenditures grew 2.7% (1.6% y/y), revised from 2.3%.

Residential investment growth was little changed at -2.9% (-3.2% y/y). It was the sixth consecutive quarter of decline.

The contribution to GDP growth from inventories was unrevised at -0.9 percentage points following 0.5 percentage positive contribution in Q1. Deterioration in the foreign trade deficit subtracted an unrevised 0.7 percentage points as exports fell at a 5.7% rate (-1.7% y/y) and imports were little changed (+2.6% y/y).

The GDP price index increased at an unrevised 2.4% rate (1.8% y/y). The PCE price index rose 2.3% (1.4% y/y) and prices excluding food & energy increased 1.7%. That pulled y/y growth down to 1.5% from its 2.0% high in Q3'18. The business fixed investment price index rose 2.0% and by a steady 1.3% y/y. The structures price index rose 3.9% y/y while equipment prices improved 0.5% y/y. The intellectual property product price index rose 0.7% y/y. The residential price index increased 1.6% (2.6% y/y).

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2012 $ (%, AR) Q2'19 (Third Estimate) Q2'19 (Second Estimate) Q2'19 (Advance Estimate) Q1'19 Q4'18 Q2'19 Y/Y 2018 2017 2016
Gross Domestic Product 2.0 2.0 2.1 3.1 1.1 2.3 2.9 2.4 1.9
  Inventory Effect (%-point) -0.9 -0.9 -0.9 0.5 0.1 0.5 0.1 0.1 -0.3
Final Sales 3.0 3.0 3.0 2.6 1.0 1.8 2.8 2.3 2.2
  Foreign Trade Effect (%-point) -0.7 -0.7 -0.7 0.7 -0.4 -0.6 -0.2 -0.2 -0.2
Domestic Final Sales 3.6 3.6 3.5 1.8 1.3 2.4 3.0 2.5 2.4
   
  Personal Consumption Expenditure 4.6 4.7 4.3 1.1 1.4 2.6 3.0 2.6 2.7
  Nonresidential Fixed Investment -1.0 -0.6 -0.6 4.4 4.8 2.6 6.4 4.4 0.7
  Residential Investment -2.9 -2.9 -1.5 -1.1 -4.6 -3.2 -1.5 3.5 6.5
  Government Spending 4.8 4.5 5.0 2.9 -0.4 2.3 1.7 0.7 1.8
Chain-Type Price Index
   GDP 2.4 2.4 2.4 1.1 1.6 1.8 2.4 1.9 1.0
    Personal Consumption Expenditure 2.3 2.3 2.3 0.4 1.3 1.4 2.1 1.8 1.0
        Less Food & Energy 1.7 1.7 1.8 1.1 1.7 1.5 1.9 1.6 1.6
    Nonresidential Investment 2.0 2.0 2.0 1.6 0.0 1.3 1.4 1.0 -0.9
    Residential Investment 1.6 1.6 1.4 2.6 2.5 2.6 5.6 4.5 3.5
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