US GDP Growth Below Expectations in Q2


The US economy advanced an annualized 1.2 percent on quarter in the three months to June of 2016, following a downwardly revised 0.8 percent growth in the first three months of the year and well below market expectations of a 2.6 percent expansion, the advance estimate released by the Bureau of Economic Analysis showed. Consumer spending was the main driver of growth while investment slumped and inventories fell for the first time since 2011.

Personal consumption expenditure (PCE) contributed 2.83 percentage points to growth (1.11 percent in the previous period), the highest contribution in six quarters. It went up 4.2 percent, above 1.6 percent in the previous quarter and also the highest growth rate since the last quarter of 2014. Spending on durable goods surged 8.4 percent, rebounding from a 0.6 percent decline in the first quarter and spending on both nondurable goods (6 percent from 2.1 percent in the first quarter) and services (3 percent from 1.9 percent in the first quarter) accelerated.

Fixed investment subtracted 0.52 percentage points to growth (-0.15 percent in the previous period) and shrank 3.2 percent (-0.9 percent in the first quarter). Nonresidential investment declined at a slower 2.2 percent (-3.4 percent in the previous period): structures fell 7.9 percent (+0.1 percent in the first quarter) and equipment declined 3.5 percent (-9.5 percent in the first quarter) while investment in intellectual property products expanded 3.5 percent (3.7 percent in the previous quarter). In addition, residential investment declined 6.1 percent, after rising 7.8 percent in the previous quarter, the first fall since the three months to March 2014.

Private inventories subtracted 1.16 percentage points from the growth, compared to a 0.41 percentage point decrease in the first quarter. Businesses lost $8.1 billion worth of inventory, compared to $40.7 billion accumulated in the previous period. It is the first time since 2011 inventories fell. 

Meanwhile, exports went up 1.4 percent after falling in each of the previous three quarters while imports declined 0.4 percent, second consecutive drop. As a result, net trade made a positive contribution to growth of 0.23 percentage points, the highest since the third quarter of 2014.

Government spending and investment subtracted 0.23 percentage points to growth, after adding 0.28 percentage points in the previous period. It went down 0.9 percent.

BEA revised data going back to 2013. The revisions partially addressed measurement issues, which have tended to lower first-quarter GDP estimates. For example: GDP growth in the first quarter of 2015 was revised sharply higher to a 2.0 percent rate from the previously reported 0.6 percent pace.

US GDP Growth Below Expectations in Q2


BEA | Joana Taborda | joana.taborda@tradingeconomics.com
7/29/2016 2:08:22 PM