Global| Jul 30 2010U.S. GDP Growth in Q2 Is Slightly Lower Than Expectations
by:Tom Moeller
|in:Economy in Brief
Summary
It's been a disappointing tale for the reports of U.S. real GDP growth since the current recovery began. The advance figure for 2Q showed growth of 2.4%, which was slightly below expectations for 2.7%. It was the fourth straight [...]
It's been a disappointing tale for the reports of U.S. real GDP growth since the current recovery began. The advance figure for 2Q showed growth of 2.4%, which was slightly below expectations for 2.7%. It was the fourth straight quarter of positive GDP growth during which it averaged 3.2%. It is, however, less than half the norm for the year following other deep postwar recessions. In addition, estimates of growth during the last three years were revised downward, mostly due to reduced estimates of personal consumption.
Growth in domestic final demand improved to 4.1% (AR) as a result of a rebound in residential investment to 27.8% growth in Q2. Growth in business investment also surged to 17.0%. Growth in personal consumption held fairly constant at a modest 1.6% and gov't spending also rose at a 4.4% rate. The contribution to last quarter's GDP growth from inventory investment slipped while foreign trade's effect went sharply negative due to a 28.8% quarterly surge in imports which offset a strong 10.4% gain in exports.
Price inflation as measured by the chained GDP price index improved to 1.8%. Nevertheless, the y/y increase of 0.8% remained barely above the lowest reading since the early-1950s. The personal consumption chain price index ticked up 0.1% last quarter but the 1.9% year-to-year gain remained near the quickest since 2008, mostly because of higher energy prices. The price index for fixed business investment also ticked up just 0.2% (-2.3% y/y) and the residential investment price index fell (-0.6% y/y).
Revisions to growth and inflation in prior years were accompanied by updated figures for corporate profitably. The revised 37.6% y/y gain as of 1Q was higher than reported last month due to strengthened financial sector earnings of 173.1% y/y. Also, the 11.3% growth in earnings from abroad was improved from last month. Offsetting these revisions was a reduced estimate of growth in nonfinancial sector earnings (26.3% y/y), though it remained the strongest since 3Q 2006.
| Chained 2005 $, % AR | Q2 '10 | Q1 '10 | Q4 '09 | Q2 Y/Y | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| GDP | 2.4 | 3.7 | 5.0 | 3.2 | -2.6 | -0.0 | 1.9 |
| Inventory Effect | 1.1 | 2.6 | 2.8 | 2.0 | -0.5 | -0.5 | -0.3 |
| Final Sales | 1.3 | 1.1 | 2.1 | 1.2 | -2.1 | 0.5 | 2.2 |
| Foreign Trade Effect | -2.8 | -0.3 | 1.9 | -0.6 | 1.0 | -1.1 | 0.7 |
| Domestic Final Demand | 4.1 | 1.3 | 0.2 | 1.8 | -3.1 | -0.6 | 1.5 |
| Personal Consumption | 1.6 | 1.9 | 0.9 | 1.6 | -1.2 | -0.3 | 2.4 |
| Business Fixed Investment | 17.0 | 7.8 | -1.4 | 5.2 | -17.1 | 0.3 | 6.7 |
| Residential Investment | 27.8 | -12.3 | -0.8 | 5.3 | -22.9 | -24.0 | -18.7 |
| Government Spending | 4.4 | -1.6 | -1.4 | 0.7 | 1.6 | 2.8 | 1.3 |
| Chained GDP Price Index | 1.8 | 1.0 | -0.2 | 0.8 | 0.9 | 2.2 | 2.9 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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