US government just now released GDP data, here is the report by Econoday. The Commerce Department confirmed the claim by many economists that second quarter growth was softer than initially believed. Second quarter GDP growth was revised down to 1.6 percent annualized from the advance estimate of 2.4 percent. The new figure was higher than analysts’ expectation for 1.3 percent.
The downward revision was primarily due to a higher net export deficit and a smaller gain in inventories. Also getting downgrades were residential investment and government purchases. Partially offsetting were modest upward revisions to personal consumption and non residential fixed investment.
Many traders are focusing on final sales. Real final sales to domestic purchasers was revised up to 4.3 percent from the initial estimate of 4.1 percent while final sales of domestic product (adds in net exports) was revised down to 1.0 percent from the advance figure of 1.3 percent.
Year-on-year, real GDP is up 3.0 percent, compared to up 2.4 percent in the first quarter.
On the inflation front, the GDP price index was bumped up marginally to 1.9 percent annualized from the initial estimate of 1.8 percent. The median market forecast called for a 1.8 percent figure for the second estimate.
Even though overall economic growth slowed substantially from the first quarter’s 3.7 percent pace, domestic demand was actually stronger-4.3 percent compared to 1.3 percent in the first quarter. Certainly, there will be some slowing in domestic demand growth in the second half but a rebound in exports could help support the overall growth rate. The bottom line is that the latest GDP revisions are more supportive of continued recovery-albeit modest-than a double dip.
On the news, equity futures gained, rates firmed marginally, and the dollar index edged up.
GDP growth for the second quarter came in at an annualized 2.4 percent for the initial estimate and followed a revised first quarter gain of 3.7 percent. Final sales of domestic product gained an annualized 1.3 percent in the second quarter, following a 1.1 percent rise the prior quarter. However, this measure includes weakness from the widening in net exports. Real final sales to domestic purchasers rose 4.1 percent, compared to a 1.3 percent gain in the first quarter. Economy-wide inflation accelerated in the second quarter as the GDP price index rose an annualized 1.8 percent, following a 1.0 percent in the first quarter. The acceleration in prices was due to the impact from net export components as domestic price inflation actually remained subdued.
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics
