Today the advance estimate for the second quarter US GDP accelerated at 4.1% at annual rate, from 2.2% in Q1, broadly in line with market expectations. Annual real GDP growth now stands at 2.8% YoY.
Current dollar GDP increased 7.4% in Q2 annualised rate (vs 4.3% in Q1), bringing the year on year growth on nominal GDP to 5.4% YoY.
While the headline number was expected to be so strong, in line with nowcasting models and business surveys, the real surprise came from Personal Consumption Expenditure, growing at 4% QoQ annualised rate, well above market expectations. The strong composition of growth, strongly domestic driven, supports the view that in 2018 the fiscal stimulus delivered will provide support for personal consumption and investments; also the expansion of government consumption, in particular defense spending, will represent an additional element of boost to the US economic performance this year.
Looking more in detail:
Personal Consumption Expenditures accelerated to 4%, due to a surge in Durable Goods (+9.3%) and Non Durables (4.2%) consumption; in part a payback from the weak reading in Q1.
Non-residential Investments were up 7.4%, with Structures up 13.2% (same pace as Q1), Equipment up 3.8% (decelerating from Q1), Intellectual property products up 8.2% QoQ (slowing from Q1). R&D keeps strong momentum.
Residential Investments keeps contracting (-1% vs -3.4% in Q1), in line with higher frequency data collected in the quarter.
Net trade: Exports surged 9.3% QoQ (Goods Exports in particular were up 13.3%) while Imports increased only 0.5%.
Government Consumption accelerated 5.3% in Q2 (4.5% prior), linked to an acceleration in Defense spending (+5.5%).
In terms of contributions, of the 4.1% GDP growth, 2.7% came from Personal Consumption Expenditures; 1% came from Non-Residential Investments, -0.04% from Residential Investments; Change in Inventories subtracted 1%, Net Exports added 1.06%, Government Spending Added 0.37%.
With this release, the Bureau of Economic Analysis also revised back to 1929 the series and changed base year to 2012.
The picture of the economy following the updates is very similar to the one presented in previous estimates:
For 1929–2012, the average annual growth rate of real GDP was 3.2% (unrevised).
For the more recent period, 2007–2017, the growth rate was 1.5% (0.1 % higher).
These revisions impacted more significantly 2014 (revised down by approx. 0.2% from 2.6% to 2.4% while 2016 was revised up by 0.1% to 1.6%. 2017 growth was revised down from 2.3% to 2.2%. broadly speaking, all revisions are in the +/- 0.1%.