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Wednesday, July 31, 2013

U.S. Economy Grew 1.7% in 2nd Quarter

Real GDP grew 1.7% in the second quarter of 2013, up from 1.1% in the first quarter. Improvements in the second quarter were driven primarily by consumption and fixed investment.



This is the BEA’s first release under a new GDP calculation system, with revisions to the entire historical GDP database. The new measurements of GDP increase it in comparison to the previous methodology. While the short term will see higher values of GDP, the longer term growth path should remain fairly consistent with the older method. In April 2013, the BEA predicted that GDP would increase roughly 3.0% as a result of the new computing measures which include new items such as research and development as well as royalties on intellectual property. Below is the graph of GDP under the old method of calculation. The newer model appears to be slightly more volatile.



Overall, second quarter GDP growth was led by consumption, with strong contributions from both fixed investment and inventory accumulation. Consumption contributed 1.2% to second quarter growth, down from the first quarter in 2013, but still above levels seen last year in the third and fourth quarter. Fixed investment improved 0.9%, up from a decline in the previous quarter.



Net exports and Government spending continue to drag on the economy, decreasing 0.8% and 0.1% respectively.

Read the BEA release.

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