GDP in the Second Quarter – Faster, Stronger

The Bureau of Economic Analysis (BEA) revised its estimate of real GDP growth to a seasonally adjusted annual rate of 4.2% in the second quarter, up from the initial estimate of 4.0%. The second estimate is based on more complete data than was available for the “advance” estimate. The estimates will be revised again next month based on more data.

The revision didn’t change the basic story: growth bounced back strongly from the 2.1% contraction in the first quarter, with all sectors contributing. Today’s revision strengthened non-residential fixed investment and reduced growth in imports and inventory investment. Residential fixed investment (RFI), homebuilding’s contribution to GDP growth, increased at an annualized rate of 7.2% and added 0.22 percentage points to growth.

The pace of GDP growth is likely to soften but remain strong in the third quarter. Healthy growth on the consumer side (personal consumption expenditures) and business side (fixed investment, residential and non-residential) will sustain momentum while inventory investment slows.

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