Global| Aug 27 2010U.S. GDP Growth Reduced; Inventory Growth & Foreign Trade Weakened
by:Tom Moeller
|in:Economy in Brief
Summary
Disappointing news about the current economic recovery continued with today's report that U.S. real GDP growth last quarter was revised down. The new figure of 1.6% (AR) compared to 2.4% in the advance report. Still, the latest was [...]
Disappointing news about the current economic recovery continued with today's report that U.S. real GDP growth last quarter was revised down. The new figure of 1.6% (AR) compared to 2.4% in the advance report. Still, the latest was barely above Consensus expectations for a revision to 1.4%. It remained the fourth straight quarter of positive GDP growth since the recession's end. At 3.0%, it remained less than half the norm for the year following other deep postwar recessions.
The revision was due to a shaved contribution from inventory accumulation of 0.6 percentage points. An increased subtraction from trade deficit deterioration to 3.4 percentage points also weakened GDP growth. Export growth was lessened to 9.2% (14.1% y/y) while growth in imports was raised to 32.4% (17.2% y/y).
Growth in domestic final demand was raised to 4.3% (AR), mostly due to increased personal consumption growth of 2.0% (1.7% y/y). Business fixed investment growth also was nudged up to 17.6% (5.3% y/y). Last quarter's strength was led by a 15.8% y/y surge in equipment spending. Offsetting these figures was residential investment where its rebound was reduced slightly to 27.1% (5.1% y/y). Gov't spending was little-revised at 4.3%.
Corporate profit figures for 2Q were released for the first time and growth of 4.6% (39.2% y/y) was the weakest of the last four quarters. Weaker or negative growth across sectors accounted for the slowdown. Nonfinancial sector earnings led last quarter's gain with an 8.1% increase (47.1% y/y) while earnings from abroad nudged up 1.4% (18.2% y/y). Financial sector earnings slipped 0.1% from 1Q but the steep interest rate yield curve kept them up 48.3% y/y.
Price inflation as measured by the chained GDP price index improved to 1.9%. Nevertheless, the y/y increase of 0.8% remained close to the lowest reading since the early-1950s. The personal consumption chain price index slipped marginally but the 1.9% year-to-year gain remained nearly the quickest since 2008, due largely to 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 at a 3.4% rate (-0.5% y/y).
The Economic Outlook and Monetary Policy is the title of today's speech by Fed Chairman Ben S. Bernanke and it can be found here.
| Chained 2005 $, % AR | Q1'10 (Prelim.) | Q2'10 (Adv.) | Q1'10 | Q4'09 | Q2 Y/Y | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|
| GDP | 1.6 | 2.4 | 3.7 | 5.0 | 3.0 | -2.6 | -0.0 | 1.9 |
| Inventory Effect | 0.6 | 1.1 | 2.6 | 2.8 | 1.9 | -0.5 | -0.5 | -0.3 |
| Final Sales | 1.0 | 1.3 | 1.1 | 2.1 | 1.1 | -2.1 | 0.5 | 2.2 |
| Foreign Trade Effect | -3.4 | -2.8 | -0.3 | 1.9 | -0.8 | 1.0 | -1.1 | 0.7 |
| Domestic Final Demand | 4.3 | 4.1 | 1.3 | 0.2 | 1.9 | -3.1 | -0.6 | 1.5 |
| Personal Consumption | 2.0 | 1.6 | 1.9 | 0.9 | 1.7 | -1.2 | -0.3 | 2.4 |
| Business Fixed Investment | 17.6 | 17.0 | 7.8 | -1.4 | 5.3 | -17.1 | 0.3 | 6.7 |
| Residential Investment | 27.1 | 27.8 | -12.3 | -0.8 | 5.2 | -22.9 | -24.0 | -18.7 |
| Government Spending | 4.3 | 4.4 | -1.6 | -1.4 | 0.7 | 1.6 | 2.8 | 1.3 |
| Chained GDP Price Index | 1.9 | 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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