The Bureau of Economic Analysis has reported that U.S. gross domestic product grew at an annualized rate of 1.7 percent [third estimate revised second estimate of +1.6 percent; original estimate was +2.4 percent] in the second quarter of 2010. The first quarter 2010 GDP was revised upward by a full percentage point to a 3.7 percent growth rate. While that may seem very positive, it merely underscores how much growth slowed in the second quarter.
The second quarter growth was led by a rebound in residential investment, a jump in investment in equipment & software, and by inventories. Personal consumption expenditures also posted a moderate gain, along with government purchases. Imports, which are a subtraction from GDP, increased as well, which was the worst news of the report.
Real final sales to domestic purchasers rose 4.1 percent, compared to +1.3 percent in the first quarter. Final sales of domestic product gained an annualized 1.3 percent in the second quarter, following a 1.1 percent rise the prior quarter. Final sales to domestic purchasers exclude inventory investment but include sales to consumers in the U.S., business fixed investment, residential investment, and government purchases. Final sales of domestic product include final sales to domestic purchasers and add in net exports (GDP less inventory investment).
Year-on-year, real GDP is up 3.2 percent, compared to +2.4 percent 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 increase in the first quarter. The acceleration in prices was due to the impact from net export components and domestic price inflation actually remained subdued. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased a bare 0.1 percent annualized in the second quarter, following a 2.1 percent boost in the first quarter. Softness in the latest period was partially energy related. Excluding food and energy prices, the price index for gross domestic purchases increased 0.9 percent in the second quarter, compared with a rise of 1.6 percent in the previous.
The soft second quarter numbers were disappointing enough, but adding to the angst was a downward revision of prior years’ estimates. The worst of the news was the following:
For 2006-2009, real GDP decreased at an average annual rate of 0.2 percent; in the previously
published estimates, the growth rate of real GDP was 0.0 percent. From the fourth quarter of
2006 to the first quarter of 2010, real GDP increased at an average annual rate of 0.2 percent; in
the previously published estimates, real GDP had increased at an average annual rate of 0.4
percent.
To review the full 2Q 2010 GDP report, please click on the “Economic Growth Statistics” page on the menu bar above or in the “Pages” list in the left-side column.
Gregg D. Killoren
victoria1014
