United States: Economic growth in Q2 revised upwards, exceeds projection
August 29, 2013
In the second quarter, GDP expanded at a seasonally adjusted annualised rate (SAAR) of 2.5%, according to the second estimate released by the Bureau of Economic Analysis (BEA) on 29 August. The print marked an improvement relative to both the 1.7% reading issued in the advance estimate and overshot market expectations, which had anticipated just 2.2% growth. The second quarter reading reflected a continued increase in domestic demand, while the contribution from the external sector to overall growth was revised upwards.
On the domestic side of the economy, private consumption rose 1.8%, which was on par with the advance estimate. Meanwhile, government spending dropped 0.9% in the first quarter (advance estimate: -0.4% quarter-on-quarter SAAR). Nevertheless, the revised Q2 reading suggests that government spending cuts associated with the sequestration have not thwarted economic recovery. Gross fixed investment rose 6.0% in the second quarter (advance estimate: 6.3%), which contrasts the 1.5% contraction registered in the first quarter.
On the external front, exports were revised upwards and imports were revised downwards compared to the advance estimate. According to the second estimate, exports rose 8.6% in the first quarter, the highest level since Q4 2010. (advance estimate: +5.4% qoq SAAR), while imports increased 7.0% (advance estimate: +9.5% qoq SAAR). As a result, the external sector posted no contribution to overall growth.
The Federal Reserve expects economic growth to range between 2.0% and 3.0% in 2013 and to accelerate to between 2.6% and 3.0% in 2014. FocusEconomics Consensus Forecast panellists expect GDP to expand 1.9% in 2013, which is unchanged from last month's forecast. For 2014, the panel expects the economy to expand 2.7%.
Author: Carl Kelly, Economist