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Second-Quarter GDP, Final Revision

Real GDP advanced at an annualized rate of 2.8 percent in the second quarter, according to the final release from the Bureau of Economic Analysis. This is a downward revision of 0.5 percentage point from the preliminary estimate, but it is still up 0.9 percentage point from the advance estimate. The downward adjustment (from preliminary to final) was largely due to a revision to real consumption growth, from an increase of 1.7 percent to 1.2 percent. Exports were also revised down from an increase of 13.2 percent to 12.3 percent, while the decrease in imports was revised up from -7.5 percent to -7.3 percent. Inventories decreased by $50.6 billion, according to the final estimate, down from a subtraction of $39.2 billion in the previous estimate. On a positive note, the contraction in residential investment, which has been quite a large drag on growth lately, was revised up 2.5 percentage points, to a decrease of -13.3 percent. While still negative, this is a considerable improvement over the -25.0 percent in the first quarter.

Real GDP and Components, 2008:Q2 Final Revision

Quarterly change
(billions of 2000$)
Annualized percent change, last:
Quarter Four quarters
Real GDP 81.4 2.8 2.1
Personal consumption 25.2 1.2 1.3
Durables -8.7 -2.8 -1.1
Nondurables 22.8 3.9 1.2
Services 7.8 0.7 1.7
Business fixed investment 8.7 5 4.2
Equipment -13.9 -5.0 -0.3
Structures 14.1 18.4 13.9
Residential investment -13.4 -13.3 -21.6
Government spending 19.8 3.9 2.6
National defense 9.2 7.3 5.9
Net exports 80.7 - -
Exports 44.1 12.3 11.0
Imports -36.6 -7.3 -1.9
Private inventories -50.6 - -
Source: Bureau of Economic Analysis.

Personal consumption expenditures added 0.9 percentage point to real GDP growth in the second quarter, according to the final estimate, down from 1.2 percentage points and 1.1 percentage points in the preliminary and advance estimates, respectively. The overall private investment picture improved somewhat, and the severity of the change in private inventories lessened from the advance to final estimates. Net exports provided an unusually large boost during the quarter, adding 2.9 percentage points to real GDP growth. Given reports of weakness in the foreign sector and the recent reversal of the dollar's slide, the kick from net exports seems likely to fade in the coming quarters.

Contribution to Percent Change in Real GDP

Another component that seems likely to weaken over the rest of the year is consumption. Personal consumption growth has been falling since 2006. While consumption growth in the second quarter outpaced the first, 1.2 percent to 0.9 percent, that was likely due to the fiscal stimulus rebate checks. The most recent monthly data suggest that third-quarter consumption growth will be negative once the distribution of those checks ceases. In July, consumption fell 5.8 percent (annualized rate) and was followed by a gain of zero in August. In fact, the 12-month growth rate in personal consumption expenditures has fallen to 0.1 percent, its lowest growth rate since August 1991.

Real Personal Consumption Expenditures
Real Personal Consumption Expenditures

Reflective of the somewhat pessimistic incoming data, the consensus estimate for the second half of the year from the Blue Chip panel of forecasters has fallen once again, to 1.0 percent GDP growth in the third quarter and 0.2 percent in the fourth. However, their consensus estimate for 2009 has remained at 1.5 percent, with growth returning to near-trend by the end of that year.

Real GDP Growth

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