GDP Growth in the Second Quarter – Consumer Strength, Better Data

The Bureau of Economic Analysis (BEA) released its “advance” estimate of real GDP growth for the second quarter of 2015 and revisions to historical estimates back to 2012. Real GDP grew at a seasonally adjusted annual rate of 2.3%, accelerating from a 0.6% rate in the first quarter. Personal consumption expenditures (PCE) contributed most of the growth (2.0%). Contributions from exports and state and local government spending where partially offset by reductions from imports and federal government spending. Private investment added 0.06 percentage points to growth in the second quarter, down from 1.39 in the first quarter.

The annual revisions, occurring every July, mainly lowered GDP growth in 2013, with 2012 and 2014 less affected. Annual GDP growth in 2013 was revised down 0.7 percentage points from 2.2% to 1.5%. Government spending and PCE were the primary culprits, with downward revisions to growth from -2.0% to -2.9%, and 2.4% to 1.7%, respectively.

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The good news in this release comes from two basic observations. First, economic activity rebounded in the second quarter after a weather-induced (less than previously estimated) pause in the first quarter, with PCE growth offsetting a slowdown in investment. And second, while revised lower in 2012 and 2013, PCE was revised higher in 2014, and is accelerating so far in 2015, showing a stronger growth trajectory over the last several years.

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