United States: GDP grows at solid pace in Q2
August 27, 2015
In the second quarter, GDP expanded at a seasonally adjusted annualized rate (SAAR) of 3.7%, according to the second estimate released by the Bureau of Economic Analysis (BEA) on 27 August. The print marked a significant upward revision from the 2.3% increase reported in the advance estimate, and beat market expectations of a 3.0% rise. The result was also much stronger than the 0.6% growth registered in Q1. The upward revision was driven mainly by strong growth in non-residential fixed investment, which had originally been reported as having contracted. The positive result adds to the argument that the domestic economy is in good enough health for the Fed to raise interest rates in the coming months. However, it is unclear if the reading will be enough to outweigh concerns about the global economy.
On the domestic side of the economy, private consumption rose 3.1%, which was just above the 2.9% growth reported in the advance estimate. Non-residential fixed investment doubled from a 1.6% increase in Q1 to a 3.2% expansion in Q2 (advance estimate: -0.6% quarter-on-quarter SAAR). Meanwhile, residential fixed investment grew 7.8%, which was above the 6.6% rise reported in the advance estimate. Government spending was up 2.6% in Q2 (advance estimate: +0.8% qoq SAAR). Moreover, business inventories presented a bigger boost to GDP than initially reported.
On the external front, exports and imports were both revised downward, although imports by much more. According to the second estimate, exports increased 5.2% in Q2 (advance estimate: +5.3% qoq SAAR). This marked a massive turnaround from the 6.0% decline registered in Q1. Imports grew 2.8% in the first quarter (advance estimate: +3.5% qoq SAAR). As a result, the external sector’s net contribution to overall growth swung from minus 1.9 percentage points in Q1 to plus 0.2 percentage points in Q2.
Author: Carl Kelly, Economist