Keeping you up to date on the latest data releases.
Real GDP rose at an annualized rate of 1.3 percent in the second quarter, according to the advance estimate by the BEA. While, that would have been a deceleration compared to what we previously knew about the first quarter, it is now an acceleration compared to first quarter growth of just 0.4 percent (more on the revisions in a minute). The (now) acceleration relative to the first quarter primarily reflects a slowdown in import growth, an upturn in federal spending, and an acceleration in real BFI. Importantly, real personal consumption expenditures, which rose 2.1 percent in the first quarter, slowed to a near flat 0.1 percent gain in the second quarter, its smallest quarterly increase since the recession ended. Both durable and nondurable goods consumption decelerated relative to their respective first quarter gains. Durables consumption fell 4.4 percent in the second quarter, relative to a 11.8 percent jump up in the first, while nondurables consumption ticked up just 0.1 percent during the quarter. Services consumption rose 0.8 percent in the second quarter, below its 4-quarter growth rate of 1.1 percent. Real business fixed investment rose 6.3 percent in the second quarter, compared with a gain of 2.1 percent in the first quarter. The acceleration was driven by a rebound in structures investment, which jumped up 8.2 percent after a 14.4 percent decrease in the first quarter. Residential investment also accelerated during the quarter, rising 3.8 percent compared to a 2.5 percent decline in the first quarter. Real import growth slowed from 8.3 percent in the first quarter to 1.3 percent in the second, subtracting just 0.2 percentage points from real GDP growth after subtracting 1.4 percentage points in the first. Real exports rose 6.0 percent in the second quarter and are up 7.9 percent over the past year. Federal government spending rose 2.2 percent in the second quarter, following a 9.4 percent decline in the first. However, state & local government expenditures slipped down 3.4 percent in the second quarter, following a 3.3 percent decrease in the first, and are now down 2.5 percent over the past year (its slowest growth rate since 1981). The “flexible” annual revision took a large chunk out of real GDP growth relative to what we thought we knew. Importantly, the level of real GDP in the second quarter of 2011 is still below its level at the start of the recession. 2008(Q4/Q4) real GDP growth was revised down from −2.8 percent to −3.3 percent, 2009(Q4/Q4) growth was revised down from a 0.2 percent gain to a decrease of 0.5 percent, and 2010(Q4/Q4) growth was actually revised up—from 2.8 percent to 3.1 percent. After the revision, the recession got deeper (from −2.8 percent to −3.5 percent), and the recovery period (since 2009:Q2) was revised down from 2.8 percent to 2.6 percent. Moreover, the recent trajectory in output growth has slowed. Real GDP growth over the last two quarters has grown just 0.8 percent, compared to a 2.4 percent growth rate over the last two quarters of 2010. As for the “source” of the downward revision, real personal consumption appears to have been knocked down the most. Its level as of the first quarter was revised down by roughly a full percentage point. The release also noted that the average annual growth rate from 2007-2010 for real disposable income (which influences consumers ability to consume) was cut in half—from 1.2 percent to 0.6 percent. The savings rate was roughly unchanged.