The BEA also released the 2011 annual revision of the national economic accounts. The general economic picture from 2007 to 2010 was not significantly changed. However, the revised estimates show a sharper cyclical contraction in GDP during 2008 and the first half of 2009. Over the six quarters of the contraction, the cumulative decrease in GDP was 5.1%, compared with 4.1% in the previous estimates.
Second-quarter GDP highlights:
The following contributed to the pickup in real GDP growth:
*Imports slowed, reflecting mainly downturns in “petroleum and products” and in “autos, engines, and parts”;
*Federal government spending turned up, reflecting an upturn in national defense spending;
*Business investment picked up, reflecting an upturn in structures investment.
Offsetting these contributions to the pickup in GDP growth was a sharp slowdown in consumer spending, led by a downturn in motor vehicles and parts.
Gross domestic purchases prices:
Prices of goods and services purchased by US residents slowed in the second quarter, increasing 3.2% after increasing 4.0% in the first quarter. Energy prices slowed, while food prices grew at about the same rate.
Excluding food and energy, prices rose 2.6% in the second quarter after rising 2.4% in the first quarter.
On the revisions
The drop in Q1 2011 growth to 0.4% was certainly not expected. Much of it was due to a reclassification of domestic inventory build (adds to GDP) to imports (subtracts from GDP). But there's a lot more.
Today's estimates reflect the annual revisions of the US national accounts. The revisions date back to 2003, which show a deeper recession and a quicker rebound. We now know that GDP bottomed in the second quarter of 2009, after having fallen 5.1% since the fourth quarter of 2007. Previously, the cumulative drop in GDP was 4.0%. The recovery through Q1 2011 was slightly faster, 4.9% in the pre-revised data compared to 4.64% in the revised series. (Rdan....4.9% is correct figure)
Broadly speaking, though, the revisions show that economic momentum is petering out on a 6-month/6-month annualized basis. In sum, nominal spending on consumption goods and services was revised downward by 307.8 billion dollars spanning the years 2008-2010, and nominal fixed investment spending dropped by 83.9 billion dollars compared to previous estimates. Government spending is proving to be less of a drag than previously thought (in nominal terms), having been revised 5 billion dollars higher compared to previous estimates over the same period.
On balance, the expected 2011 growth trajectory will struggle to top 2%, as a rather positive 2H 2011 of 3.0% and 3.5% in Q3 and Q4, respectively, would imply a 1.9% Y/Y pace for 2011 as a while. I seriously doubt we'll get that trajectory in H2 2011 - we'll have to see what economists now forecast - but the downside risk to the economy is pervasive. It's not just Japan. For the latest updates PRESS CTR + D or visit Stock Market news Today
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