WASHINGTON (8/28/15)--A second estimate of gross domestic product (GDP) for second quarter revealed that the economy expanded by 3.7%, according to the Bureau of Economic Analysis, which reported a 2.3% expansion in its preliminary reading.
GDP growth in the first quarter came in at 0.6%.
“Positive revisions were widespread, though the contribution from inventory investment was a negative for the outlook,” said Scott Hoyt, Moody’s analyst (Economy.com Aug. 27). “Consumer spending, exports, state and local spending, and fixed investments contributed to growth; imports were a drag.”
Consumer spending posted the strongest growth, contributing 2.1% to overall GDP growth, according to Moody’s. In the first quarter consumer spending contributed 1.2%.
Also, inventories rose rapidly in second quarter; however, that potentially sets the stage for a weak third quarter for the segment.
On an annual basis, GDP rose 2.7%, a modest step back from first quarter’s 2.9% year-over-year growth rate.
“The economic recovery has lasted six years and shows no signs of old age,” Hoyt said.
Still, wage and income growth continue to struggle, with real disposable income climbing by 1.3% in second quarter after a 3.9% jump in the first.
While GDP ramped up in the second quarter, gross domestic income (GDI), which tracks the income earned in the production of all goods and services sold, ticked up by only 0.6%.
That marks the largest gap between GDP growth and GDI growth since the third quarter of 2007, according to MFR U.S. Economist Josh Shapiro (MarketWatch Aug. 27).
“Some research has shown the GDI figures to be a more accurate representation of economic activity, but the evidence is mixed and the debate continues,” Shapiro said. “Nonetheless, the disparity reported in second quarter does lend credence to the notion that the GDP growth reported in the quarter likely overstates the underlying vitality of the economy.”