US GDP growth revised down to 1.6%

[Integral]

Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 1.6 percent in the second quarter of 2010,
(that is, from the first quarter to the second quarter), according to the "second" estimate released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.

The GDP estimates released today are based on more complete source data than were available for
the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.4
percent (see "Revisions" on page 3).

The increase in real GDP in the second quarter primarily reflected positive contributions from
nonresidential fixed investment, personal consumption expenditures, exports, federal government
spending, private inventory investment, and residential fixed investment. Imports, which are a
subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the second quarter primarily reflected a sharp acceleration in
imports and a sharp deceleration in private inventory investment that were partly offset by an upturn in
residential fixed investment, an acceleration in nonresidential fixed investment, an upturn in state and
local government spending, and an acceleration in federal government spending.

Current-dollar GDP
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
3.6 percent, or $128.6 billion, in the second quarter to a level of $14,575.0 billion. In the first quarter,
current-dollar GDP increased 4.8 percent, or $169.1 billion.

Revisions
The “second” estimate of the second-quarter increase in real GDP is 0.8 percentage point, or $25.0
billion, lower than the advance estimate issued last month, primarily reflecting an upward revision to
imports and downward revisions to private inventory investment and to exports that were partly offset
by an upward revision to personal consumption expenditures.

This does not bode well for the unemployment picture.

I will post pretty graphs showing the component-by-component breakdown later today, hopefully both the pre- and post-revision estimates.

 

[JerichoHill]

expected.

People and pundits pounce far to early on the prelim estimates

 

[Integral]

First, I guess, the good news: all components of aggregate demand increased last quarter.
The caveat: most of that increase in AD was filled via imports.


Note1: Investment is broken down into Structures, Equipment & Software, Residential, and Inventory categories
Note2: Government spending is broken down into Federal Defense, Federal Nondefense, and State & Local categories
Note3: Adding all the numbers *except* GDP should get the GDP number
Note4: Imports actually *rose* about 4%, but they are a subtraction from GDP and are listed here as a negative number.

I've normalized all the numbers to their proportion of GDP. So, by common measure, consumption expenditures are 70% of GDP so the "consumption" number is its actual growth rate weighted by 70%. Same for investment, government spending, and net exports.

Real domestic demand (i.e., ignoring inventories, exports, and imports) rose by 4.35%

 

[Cutlass]

Fun is. And I foresee a government too paralyzed to do anything useful about it.

 

[GoodGame]

How useful is knowing the total Imports level if that info is not indexed to the other categories?

Also, what exactly is "Structures"? Does that mean factories/warehouses, or does that include building new retail operations, etc... But basically the revised increase in Structures means that economic operations are expanding, which is probably a good thing, correct?

And people are investing increased capital in equipment, to support growth right?

So overall corporations look to be trying to expand operations?

 

[Oerdin]

I like the effects of free trade but right now imports are killing our economy and we need to restore some balance. I'm now all for fair trade which would be free trade among countries which have basic worker protections in place, basic environmental standards, and basic things like not allowing child labor, etc...

If a country doesn't meet those basic standards then tariff the heck out of them and keep them off the market. This will give countries an incentive to improve their legal protections rather then constantly striping out such protections.

 

[Integral]

How useful is knowing the total Imports level if that info is not indexed to the other categories?

Also, what exactly is "Structures"? Does that mean factories/warehouses, or does that include building new retail operations, etc... But basically the revised increase in Structures means that economic operations are expanding, which is probably a good thing, correct?

And people are investing increased capital in equipment, to support growth right?

So overall corporations look to be trying to expand operations?

Ideally the 'Imports' category wouldn't exist at all but would be netted against each individual category of domestic demand. I don't think there's a way to do this yet from the way we currently collect the data.

Structures includes virtually all plant and equipment purchases including the building of new factories/warehouses/etc. The revised increase in structures investment is basically 0; the advance estimate was a bit higher.

Fortunately the other categories of investment are showing some strength. Remember that investment as a whole is not a large part of GDP (15% or so), so the actual change is much larger than my chart suggests.

--

The unemployment numbers from today were a tad depressing. My little toy model of the unemployment rate predicted 9.4%, not 9.6% as actually occurred. Bah. I blame Census hiring for throwing off my estimates.