Thursday, August 28, 2014

Second Quarter GPD Revised Up to 4.2%

Real GDP growth for the second quarter was revised up to 4.2% in the BEA’s second estimate. The upward revision was driven primarily by higher fixed investment growth than initially forecast, and secondarily by a lower drag from net exports. Growth in the second quarter jumped following the decline in the first quarter. Despite the growth, second quarter GDP was held back by slower contributions from inventory accumulation and lower government spending.

Consumption remained the strongest component of growth, contributing 1.7% to second quarter growth, the same in the previous estimate. Fixed investment jumped from its previous reading of 0.9% to 1.3%. Inventories contributed 1.4% in the second quarter, following a 1.2% decline in the first quarter. Inventories tend to be highly volatile. The government went from dragging growth by 0.2% in the first quarter to contributing 0.3% growth in the second.

The healthy growth of the economy in the second quarter is due to several factors. Firstly, the harsh winter is over and the second quarter rebounded as a result. Moreover, the government’s austerity measures are no longer negatively weighing on GDP growth.

Read the BEA release.

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