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 3.4 percent in the second quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent.
The Bureau emphasized that the second-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The second-quarter "preliminary" estimates, based on more comprehensive data, will be released on August 30, 2007.
The U.S. economy grew last quarter at the fastest pace in more than a year, propelled by rising exports, commercial construction and government spending.
The 3.4 percent annual pace of expansion followed a 0.6 percent gain in the first quarter, the Commerce Department reported today in Washington. The Federal Reserve's preferred inflation gauge rose at the slowest pace in four years.
Spending on commercial construction projects rose at the fastest pace in 13 years, helping to overcome another drop in homebuilding. Factories ramped up production to fill orders from Europe and Asia that made up for a slowdown in consumer spending. Smaller price increases may be of some comfort to Fed policy makers, who have said inflation is their biggest concern.
After hitting a pothole in the first quarter, the U.S. economy rebounded in the second quarter, growing at an annual rate of 3.4%, the fastest pace since the first quarter of 2006, the Commerce Department said Friday.
The increase in real gross domestic product was slightly below market expectations for a gain of 3.6%, according to a survey of economists conducted by MarketWatch. See Economic Calendar.
GDP rose just 0.6% in the first quarter.
Let's go a bit deeper into the numbers.
Personal Consumption Expenditures Increased at a seasonally adjusted annual rate (SAAR) of 1.3%. This is the lowest quarterly increase since the fourth quarter of 2005. Consumer purchases decreased across the board -- durable goods, non-durable goods and services. Considering that 70% of U.S. growth comes from consumer spending, this is not a welcome development.
Residential investment decrease 9.3% SAAR. The previous four quarters came in at decreases of 11%, 20%, 16% and 17%. That makes this quarters number a bit of an increase from the previous 4 quarters. Considering the news from the housing sector, I have to wonder if this slower rate of decrease in investment will continue.
Non-residential construction increased at a 22.1% SAAR. This is the biggest increase we have seen this expansion. That means it may be a one time affair. Companies may have decided to make one last push on investment before they shuttered projects for the next few quarters. Whatever the actual reason, this pace is probably unsustainable.
Exports increased 6.4%. Thank-you cheap dollar.
Government spending increased 4.2%.
I think the best way to look at this report comes from CBS. Marketwatch:
Economists said the weakness in the first quarter and the subsequent strength in the second quarter are both overstated, and the best way to understand the economy was to average the growth rate over the past six months. This produces a 2.0% average growth rate in the first half of the year.