US GDP second quarter of 2011

US GDP second quarter of 2011 : Bureau of Economic Analysis today reported that real gross domestic product in the US increased at an annual rate of 1.3% in the second quarter of 2011. acceleration in real GDP was driven primarily by a slowdown in import demand, stronger federal spending, and a pickup in non-residential fixed investment. Real gross domestic purchases - GDP minus net exports - was weaker than the headline, increasing 0.7% on the quarter, reflecting the positive contribution from external demand. Domestic demand is barely growing - remember these are annualized rates, not q.q rates

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.