US Economy Grows in Second Quarter, GDP up 2.4%

[tritsofme]

In line with expections, still pretty anemic growth.

Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 2.4 percent in the second quarter of 2010,
(that is, from the first quarter to the second quarter), according to the "advance" estimate released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.

The Bureau emphasized that the second-quarter advance estimate released today is based on
source data that are incomplete or subject to further revision by the source agency (see the box on page 3).
The "second" estimate for the second quarter, based on more complete data, will be released on
August 27, 2010.
__________________
BOX.--
The estimates released today reflect the regular annual revision to the national income and product
accounts (NIPAs), beginning with the estimates for the first quarter of 2007. Annual revisions, which
are usually released in July, incorporate source data that are more complete, more detailed, and
otherwise more reliable than those previously available. This release includes the revised quarterly
estimates of GDP, corporate profits, and personal income and provides an overview of the effects of the
revision.

The August 2010 Survey of Current Business will contain NIPA tables and an article describing
the revisions. The revised estimates will be available on BEA’s Web site at www.bea.gov.
___________________
FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified.
Quarter-to-quarter dollar changes are differences between these published estimates. Percent changes are
calculated from unrounded data and are annualized. “Real” estimates are in chained (2005) dollars. Price
indexes are chain-type measures.

This news release is available on BEA’s Web site along with the Technical Note and Highlights
related to this release.
____________________

The increase in real GDP in the second quarter primarily reflected positive contributions from
nonresidential fixed investment, exports, personal consumption expenditures, private inventory
investment, federal government spending, and residential fixed investment. Imports, which are a
subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the second quarter primarily reflected an acceleration in imports
and a deceleration in private inventory investment that were partly offset by an upturn in residential
fixed investment, an acceleration in nonresidential fixed investment, an upturn in state and local
government spending, and an acceleration in federal government spending.

Final sales of computers added 0.04 percentage point to the second-quarter change in real GDP
after adding 0.10 percentage point to the first-quarter change. Motor vehicle output subtracted 0.01
percentage point from the second-quarter change in real GDP after adding 0.74 percentage point to the
first-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 0.1 percent in the second quarter, compared with an increase of 2.1 percent in the first.
Excluding food and energy prices, the price index for gross domestic purchases increased 0.9 percent in
the second quarter, compared with an increase of 1.6 percent in the first.

Real personal consumption expenditures increased 1.6 percent in the second quarter, compared
with an increase of 1.9 percent in the first. Durable goods increased 7.5 percent, compared with an
increase of 8.8 percent. Nondurable goods increased 1.6 percent, compared with an increase of 4.2
percent. Services increased 0.8 percent, compared with an increase of 0.1 percent.

Real nonresidential fixed investment increased 17.0 percent in the second quarter, compared with
an increase of 7.8 percent in the first. Nonresidential structures increased 5.2 percent, in contrast to a
decrease of 17.8 percent. Equipment and software increased 21.9 percent, compared with an increase of
20.4 percent. Real residential fixed investment increased 27.9 percent, in contrast to a decrease of 12.3
percent.

Real exports of goods and services increased 10.3 percent in the second quarter, compared with
an increase of 11.4 percent in the first. Real imports of goods and services increased 28.8 percent,
compared with an increase of 11.2 percent.

Real federal government consumption expenditures and gross investment increased 9.2 percent
in the second quarter, compared with an increase of 1.8 percent in the first. National defense increased
7.4 percent, compared with an increase of 0.4 percent. Nondefense increased 13.0 percent, compared
with an increase of 5.0 percent. Real state and local government consumption expenditures and gross
investment increased 1.3 percent, in contrast to a decrease of 3.8 percent.

The change in real private inventories added 1.05 percentage points to the second-quarter change
in real GDP after adding 2.64 percentage points to the first-quarter change. Private businesses increased
inventories $75.7 billion in the second quarter, following an increase of $44.1 billion in the first quarter
and a decrease of $36.7 billion in the fourth.

Real final sales of domestic product -- GDP less change in private inventories -- increased 1.3
percent in the second quarter, compared with an increase of 1.1 percent in the first.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 5.1 percent in the second quarter, compared with an increase of 3.9 percent in the
first.

Disposition of personal income

Current-dollar personal income increased $123.9 billion (4.1 percent) in the second quarter,
compared with an increase of $122.8 billion (4.1 percent) in the first.

Personal current taxes increased $1.3 billion in the second quarter, compared with an increase of
$19.6 billion in the first.

Disposable personal income increased $122.6 billion (4.4 percent) in the second quarter,
compared with an increase of $103.3 billion (3.8 percent) in the first. Real disposable personal income
increased 4.4 percent, compared with an increase of 1.7 percent.

Personal outlays increased $36.6 billion (1.4 percent) in the second quarter, compared with an
increase of $98.2 billion (3.8 percent) in the first. Personal saving -- disposable personal income less
personal outlays -- was $707.1 billion in the second quarter, compared with $621.1 billion in the first.
The personal saving rate -- saving as a percentage of disposable personal income -- was 6.2 percent in
the second quarter, compared with 5.5 percent in the first. For a comparison of personal saving in
BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow
of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-
Frb.asp.


Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
4.3 percent, or $151.3 billion, in the second quarter to a level of $14,597.7 billion. In the first quarter,
current-dollar GDP increased 4.8 percent, or $169.1 billion.


_______________
BOX.--

Information on the assumptions used for unavailable source data is provided in a technical note
that is posted with the news releae on BEA's Web site. Within a few days after the release, a detailed
"Key Source Data and Assumptions" file is posted on the Web site. In the middle of each month, an
analysis of the current quarterly estimate of GDP and related series is made available on the Web site;
click on Survey of Current Business, "GDP and the Economy."
_______________

Revision of the National Income and Product Accounts


The revised estimates, which begin for most statistics with 2007, reflect the results of the regular
annual revision of the national income and product accounts (NIPAs). These revisions, usually made
each July, incorporate newly available and more comprehensive source data, as well as improved
estimating methodologies. In this annual revision, the notable revisions primarily reflect the
incorporation of newly available and revised source data. For example, the revised estimates of profits
reflect newly available Internal Revenue Service tabulations of tax returns for corporations for 2008 and
revised tabulations for 2007. A table showing the major current-dollar revisions and their sources for
each component of GDP, national income, and personal income will be published in the August 2010
issue of the Survey of Current Business.

Because of the additional data shown, tables 3, 11, and 12 are each divided into two separate
tables -- 3A and 3B, 11A and 11B, and 12A and 12B. There are also a number of special tables that
compare the revised and previously published estimates for selected periods: table 1A shows the
percent change in real GDP and related measures; table 1B shows revisions to current-dollar GDP, to
national income, and to disposition of personal income; table 2A shows contributions to the percent
change in real GDP; table 4A shows the percent change in the chain-type price indexes for GDP and
related measures; and table 12C shows revisions to corporate profits by industry.

This section of the release discusses the highlights of the revisions and describes their sources.


Summary of revisions

* For 2006-2009, real GDP decreased at an average annual rate of 0.2 percent; in the previously
published estimates, the growth rate of real GDP was 0.0 percent. From the fourth quarter of
2006 to the first quarter of 2010, real GDP increased at an average annual rate of 0.2 percent; in
the previously published estimates, real GDP had increased at an average annual rate of 0.4
percent.

* For the revision period, the change in real GDP was revised down for all 3 years: 0.2 percentage
point for 2007, 0.4 percentage point for 2008, and 0.2 percentage point for 2009.

* The downward revisions to the annual estimates for 2007 and 2009 reflect partly offsetting
revisions to the quarters within a year. For example, for 2009, the annual rate of change in GDP
for the first quarter was revised up 1.5 percentage points from a large decrease to a smaller
decrease, while the growth rates for the third and fourth quarters were each revised down 0.6
percentage point. The second quarter of 2009 was unrevised. For 2008, the downward revision
to the change in real GDP reflects downward revisions for the second, third, and fourth quarters.

* For the 13 quarters from the first quarter of 2007 to the first quarter of 2010, the average revision
(without regard to sign) was 0.7 percentage point. The revisions did not change the direction of
the change in real GDP (increase or decrease) for any quarter.

* For 2006-2009, the average annual rate of growth of real disposable personal income was revised
up 0.3 percentage point, from 1.2 percent to 1.5 percent.

* From the fourth quarter of 2006 to the first quarter of 2010, the average annual rate of increase in
the price index for gross domestic purchases was revised down from 2.0 percent to 1.9 percent.
The average annual rate of increase in the price index for personal consumption expenditures
(PCE) was revised up from 2.1 percent to 2.2 percent, and the “core” PCE price index (which
excludes food and energy) was revised up from 1.9 percent to 2.0 percent.

* For the revision period, national income was revised down for all 3 years: 0.4 percent for 2007,
0.6 percent for 2008, and 0.4 percent for 2009.

* For the revision period, corporate profits was revised down for all 3 years: 2.0 percent for 2007,
7.2 percent for 2008, and 3.9 percent for 2009.


Revisions to 2007-2009 estimates

The percent change from the preceding year in real GDP was revised down for all 3 years: from
2.1 percent to 1.9 percent for 2007, from an increase of 0.4 percent to 0.0 percent for 2008, and from a
decrease of 2.4 percent to a decrease of 2.6 percent for 2010.

For 2007, the largest contributors to the revision to real GDP growth were a downward revision
to PCE, an upward revision to imports, and a downward revision to state and local government
spending; these revisions were partly offset by upward revisions to inventory investment, to exports, and
to nonresidential fixed investment. For 2008, the largest contributors to the revision were a downward
revision to nonresidential fixed investment, a downward revision to inventory investment, and an
upward revision to imports; these revisions were partly offset by an upward revision to exports. Within
PCE, a downward revision to PCE for goods was mostly offset by an upward revision to PCE for
services. For 2009, the largest contributors to the revision were downward revisions to PCE, to state and
local government spending, and to residential fixed investment; these revisions were partly offset by
upward revisions to inventory investment and to nonresidential fixed investment, and a downward
revision to imports. The revision to PCE was in PCE for services.

The percent change from fourth quarter to fourth quarter in real GDP was revised down from 2.5
percent to 2.3 percent for 2007, was revised down from a decrease of 1.9 percent to a decrease of 2.8
percent for 2008, and was revised up from an increase of 0.1 percent to an increase of 0.2 percent for
2009.

For the period of contraction from the fourth quarter of 2007 to the second quarter of 2009, real
GDP decreased at an average annual rate of 2.8 percent; in the previously published estimates, it had
decreased 2.5 percent.

The percent change from the preceding year in real gross domestic income (GDI) was revised
down from 0.6 percent to 0.1 percent for 2007, was revised down from a decrease of 0.4 percent to a
decrease of 0.8 percent for 2008, and was revised up from a decrease of 3.2 percent to a decrease of 2.9
percent for 2009.



The percent change from the preceding year in the price index for gross domestic purchases was
unrevised at 2.9 percent for 2007, was unrevised at 3.2 percent for 2008, and was revised down from a
change of 0.0 percent to a decrease of 0.2 percent for 2009. For the quarters of 2007 to 2009, the
percent change in the price index was revised down for five quarters and was revised up for seven
quarters; the largest downward revision was 0.8 percentage point (for the fourth quarter of 2007).

Current-dollar GDP was revised down for all 3 years: $15.8 billion, or 0.1 percent, for 2007;
$72.3 billion, or 0.5 percent, for 2008; and $137.3 billion, or 1.0 percent, for 2009. The percent change
from the preceding year was revised down from 5.1 percent to 4.9 percent for 2007; was revised down
from 2.6 percent to 2.2 percent for 2008; and was revised down from a decrease of 1.3 percent to a
decrease of 1.7 percent for 2009. Current-dollar gross national product (GNP) (GDP plus net receipts of
income from the rest of the world) was revised down $8.2 billion, or 0.1 percent, for 2007; was revised
down $39.7 billion, or 0.3 percent, for 2008; and was revised down $95.9 billion, or 0.7 percent, for
2009. Net receipts of income was revised up for all 3 years: $7.5 billion for 2007, $32.6 billion for
2008, and $41.3 billion for 2009. The revisions to net receipts of income -- which affect GNP, national
income, corporate profits, net interest and miscellaneous payments, and personal income receipts on
assets -- resulted from the revisions to BEA's international transactions accounts (ITAs) that were
released in June. Although the revisions to the ITAs extended back to 1999, the revisions prior to 2007
were not incorporated into the NIPAs at this time. (An article describing the revisions to the ITAs was
published in the July 2010 issue of the Survey of Current Business.)

National income was revised down for all 3 years: $51.8 billion, or 0.4 percent, for 2007; $77.4
billion, or 0.6 percent, for 2008; and $55.0 billion, or 0.4 percent, for 2009. For 2007, downward
revisions to corporate profits and to supplements to wages and salaries were partly offset by an upward
revision to wages and salaries. For 2008, downward revisions to corporate profits and to the current
surplus of government enterprises were partly offset by upward revisions to wages and salaries, to rental
income of persons, and to supplements to wages and salaries. For 2009, downward revisions to
corporate profits and to nonfarm proprietors’ income were partly offset by an upward revision to
supplements to wages and salaries.

Corporate profits from current production -- profits before tax with inventory valuation and
capital consumption adjustments -- was revised down for all 3 years: $31.1 billion, or 2.0 percent, for
2007; $97.6 billion, or 7.2 percent, for 2008; and $50.9 billion, or 3.9 percent, for 2009. For all 3 years,
downward revisions to corporate profits before tax more than accounted for the revision. These
downward revisions were partly offset by upward revisions to the capital consumption adjustment.

For 2007 and 2009, downward revisions to profits of domestic financial and domestic
nonfinancial corporations were partly offset by an upward revision to profits from the rest of the world.
For 2008, downward revisions to profits of domestic financial corporations was partly offset by upward
revisions to profits of domestic nonfinancial corporations and to profits from the rest of the world.


Personal income was revised up for all 3 years: $18.2 billion, or 0.2 percent, for 2007; $152.3
billion, or 1.2 percent, for 2008; and $155.9 billion, or 1.3 percent, for 2009. For 2007, upward
revisions to personal dividend income and to wages and salaries were partly offset by a downward
revision to supplements to wages and salaries. For 2008, upward revisions to personal dividend income,
to wages and salaries, to rental income of persons, and to supplements to wages and salaries were partly
offset by a downward revision to nonfarm proprietors’ income. For 2009, upward revisions to personal


dividend income, to supplements to wages and salaries, and to government social benefits to persons
were partly offset by a downward revision to nonfarm proprietors’ income and to personal interest
income.

Disposable personal income (DPI) (personal income less personal current taxes) was revised up
all 3 years: $20.5 billion, or 0.2 percent, for 2007; $146.5 billion, or 1.4 percent, for 2008; and $117.6
billion, or 1.1 percent, for 2009. Personal current taxes was revised down $2.2 billion for 2007, was
revised up $5.8 billion for 2008, and was revised up $38.3 billion for 2009. The percent change from
the preceding year in real DPI was revised up from 2.2 percent to 2.3 percent for 2007, was revised up
from 0.5 percent to 1.7 percent for 2008, and was revised down from 0.8 percent to 0.6 percent for 2009.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments --
was revised down for all 3 years: $15.4 billion for 2007, $15.0 billion for 2008, and $79.1 billion for
2009. For all 3 years, downward revisions to PCE more than accounted for the revisions to personal
outlays. The personal saving rate (personal saving as a percentage of DPI) was revised up for all 3
years: from 1.7 percent to 2.1 percent for 2007, from 2.7 percent to 4.1 percent for 2008, and from 4.2
percent to 5.9 percent for 2009.

The statistical discrepancy is current-dollar GDP less current-dollar gross domestic income
(GDI). It arises because most components of GDP and of GDI are estimated independently. GDP
measures final expenditures -- the sum of consumer spending, private investment, net exports, and
government spending. GDI measures the incomes earned in the production of GDP. In concept, GDP is
equal to GDI. In practice, they differ because they are estimated using different source data and
different methods.

As a result of the annual revision, the statistical discrepancy as a percentage of GDP was revised
from a negative 0.1 percent to a positive 0.2 percent for 2007, was revised up from 0.7 percent to 1.0
percent for 2008, and was revised down from 1.5 percent to 1.3 percent for 2009. For 2007 and 2008,
the revisions to the discrepancy reflected downward revisions to GDP that were smaller than the
downward revisions to GDI. For 2009, the revision to the discrepancy reflected a downward revision to
GDP that was larger than the downward revision to GDI.


New source data

The annual revision incorporated data from the following major federal statistical sources:
Census Bureau new and revised manufacturing economic census data for 2007; Census Bureau annual
survey of manufactures for 2008; Census Bureau annual surveys of merchant wholesale trade and of
retail trade for 2007 (revised) and for 2008; Census Bureau revised monthly indicators of manufactures,
of merchant wholesale trade, and of retail trade for 2007-2009; Census Bureau annual surveys of
services for 2007 (revised), 2008 (revised), and 2009 (preliminary), and of state and local government
finances for fiscal years 2006 (revised), 2007 (revised), and 2008 (preliminary); Census Bureau monthly
survey of construction spending (value put in place) for 2007-2009 (revised); Census Bureau quarterly
services survey for 2007-2009 (revised); Census Bureau current population survey/housing vacancy
survey for 2009; federal government budget data for fiscal years 2009 and 2010; Internal Revenue
Service tabulations of tax returns for corporations for 2007 (revised) and 2008 (preliminary) and for sole
proprietorships and partnerships for 2008; Bureau of Labor Statistics (BLS) quarterly census of


employment and wages for 2007-2009 (revised); new BLS occupational employment survey data for
2009; Department of Agriculture farm statistics for 2007-2009; and BEA's ITAs for 2007-2009
(revised).


Changes in methodology

The annual revision also incorporated improvements to estimating methodologies, including the
following:

* Beginning with the first quarter of 2010, data from the Census Bureau’s expanded quarterly
services survey (QSS) are incorporated into the quarterly estimates of personal consumption
expenditures (PCE) categories for health care, transportation, recreation, and other services. As
a result, the percentage of quarterly PCE services that are based on the QSS has increased from
16 percent to 39 percent.

* Quality-adjusted communications equipment price indexes from the Federal Reserve Board are
incorporated into the estimates of communication equipment within private fixed investment and
into the estimates of “other” capital goods within exports and imports of goods. The Federal
Reserve Board’s price index for data networking equipment, currently used in the estimates of
communication equipment within private fixed investment, is incorporated into the estimates of
“other” capital goods within exports and imports.

* The deflator for command-basis GNP -- a measure of the goods and services produced by the
U.S. economy in terms of the purchasing power of the income generated from those goods and
services -- has changed to the price index for gross domestic purchases, which better reflects the
uses rather than the sources of income. In addition, the gross domestic purchases index is used
to deflate the trade balance in calculating command-basis GDP, which was not previously
published. These changes are carried back to 1929 for annual estimates and to 1947 for quarterly
estimates.

* The NIPA measures of saving and investment are improved. The NIPA tables are expanded to
provide additional detail on national saving and investment, such as estimates of net lending and
borrowing by sector. Migrants’ transfers are excluded from the capital account beginning with
1982. (This definitional change is consistent with the change made in the annual revision of
BEA’s international transactions accounts that was released in June.)

* Other definitional changes in the international transactions accounts, such as the reclassification
of certain goods and services, are incorporated in the NIPAs beginning with 2007. These
reclassifications have little effect on overall GDP, though they affect the goods and services
composition of exports and imports.



BEA's national, international, regional, and industry estimates; the Survey of Current Business;
and BEA news releases are available without charge on BEA's Web site at www.bea.gov. By visiting the
site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

* * *

Next release – August 27, 2010, at 8:30 A.M. EDT for:
Gross Domestic Product: Second Quarter 2010 (Second Estimate)
Corporate Profits: Second Quarter (Preliminary Estimate)
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

[Statistical]

1. Yeah in high 3s would be better but growing is growing.

[tritsofme]

4. Q1 is revised up to 3.7%

Today was a benchmark revision.

Which is good in the sense there was higher growth earlier in the year, but it makes the drop off of in Q2 all the more troubling.

[Turbineguy]

2. Personal savings rate!

This is good. Unwinding leverage. Saving money. Poised for solid growth.

[Statistical]

5. Sadly this is the worst time to save.

For 3 decades American's didn't save. They didn't save durring the super boom years when there was no reason not to save.

Even worse via second mortgages & HELOCs many had a negative savings rate for decades straight.

Now when we need consumption Americans are saving.

That being said I am saving & paying down debt. :) Tragedy of the commons is hard to break.

[Turbineguy]

7. But we are Americans

So most likely, we are "saving up".

[ixion]

3. compare and contrast with

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8845661

Interesting how the economy can grow with consumer spending down and the companies still shedding jobs.

[Statistical]

6. July is Q3.

The second half of the year is going to be tougher to pull in positive numbers.

Jan, Feb, Mar - Q1
Apr, May, Jun - Q2
Jul, Aug, Sep - Q3
Oct, Nov, Dec - Q4