The Bureau of Economic Analysis (BEA) released the second estimate of real GDP growth for the second quarter of 2013. Real GDP grew at a seasonally adjusted annual rate of 2.5%, revised up from the advance estimate last month of 1.7% second quarter growth. The upward revision was due primarily to stronger exports and weaker imports (which subtract from GDP), and to a lesser extent a larger contribution from inventory investment. These gains were partially offset by a downward revision to state and local government spending. Real GDP growth in the first quarter was 1.1%.
The acceleration of growth in the second quarter from the first quarter should be viewed with some caution. The increase owes much to faster growth in exports and nonresidential fixed investment, but was undermined by slower growth of personal consumption expenditures (PCE). The report also confirmed weak price growth in the second quarter, with the price indexes for both broad GDP and core PCE (excluding food and energy) rising at a 0.8% annual rate.
Today’s report shows a strengthening economy, but weak price growth, a mixed result that will increase the scrutiny of the September employment report, due out the Friday after Labor Day. These three updates on growth, inflation and jobs will weigh heavily on the Federal Reserve’s deliberations at the upcoming September 17-18 monetary policy meeting as they consider the timing of the winding down of the current round of bond purchases.