United States: Growth stalls in the first half of the year
July 29, 2011
Latest data show that the economy is in worse shape than previously estimated. In the second quarter, GDP grew just 1.3% at a seasonally adjusted annualised rate (saar), according to advance estimates released by the Bureau of Economic Analysis (BEA) on 29 July. The print fell short of market expectation that had the economy expanding 1.8%. In addition, the BEA revised its previous quarter's growth estimate to 0.4%, which was well below the previous estimate of 1.9%. The improvement over the previous quarter mainly reflected stronger total fixed investment, which picked up to 5.9% (Q1 2011: +1.2% qoq saar) amid notable improvements in both residential and non-residential investment, along with a positive contribution from inventories. In contrast, personal consumption expenditures fell sharply from the 2.1% expansion in Q1 to a paltry 0.1% increase in Q2. Meanwhile, government consumption moderated the pace of contraction from a 5.9% drop in the previous quarter to a 1.1% decrease. Amid the decline in personal consumption expenditures, imports slowed markedly from 8.3% in Q1 to 1.3%, which compensated for a deceleration in exports (Q1: +7.9% qoq saar; Q2: +6.0% qoq saar). As a result, the net contribution from the external sector to overall growth swung from minus 0.3 percentage points in Q1 to plus 0.6 percentage points in Q2. Along with the release of this year's GDP data, the BEA published revised figures for the previous years, which showed that the crisis struck deeper than previously estimated. According to these data, GDP contracted by 0.3% and 3.5% in 2008 and 2009 respectively, down from the previous estimates of 0.0% and minus 2.6% respectively. In its most recent projections from June, the Federal Reserve cut its growth forecast down to between 2.7% and 2.9% for this year (April forecast: +3.1% and +3.3%) and to between 3.3% and 3.7% for 2012 (April forecast: +3.5% and +4.2%).