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GDP Growth Substantially Improves in ‘Advance’ Q2 Estimate

rising-arrows-twoThe nation's real gross domestic product (GDP) bounced back from a dismal first quarter with an annual growth rate of 2.3 percent in the "advance" estimate for Q2 released Thursday by the Bureau of Economic Analysis (BEA).

The GDP growth rate in the first quarter, which was reported to be an annual rate of minus 0.2 percent in the BEA's third and final estimate released in late June, was revised upwardly and reported on Thursday to be 0.6 percent.

"These results are in line with years past when we have had a very weak first quarters followed by more normal second quarters," said Mark Fleming, Chief Economist with First American. "The quarter-over-quarter jump isn't a signal of rebounding, but is simply a return to more normal rates of growth. The 2.3 percent rate for the second quarter is probably in line with where we will land at the end of the year—2.3 percent for 2015."

The Q2 increase in real GDP reflected "positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending, private inventory investment, and nonresidential fixed investment," according to the BEA report. Meanwhile, imports, which are a subtraction when GDP is calculated, increased in Q2.

"The good news in this release comes from two basic observations," said Robert Denk, Assistant VP for Forecasting and Analysis at the National Association of Home Builders (NAHB), on the NAHB's Eye on Housing blog. "First, economic activity rebounded in the second quarter after a weather-induced (less than previously estimated) pause in the first quarter, with PCE growth offsetting a slowdown in investment. And second, while revised lower in 2012 and 2013, PCE was revised higher in 2014, and is accelerating so far in 2015, showing a stronger growth trajectory over the last several years."

Also on Thursday, the BEA released annual revisions of real GDP growth for each year dating back to 2012. The BEA found that real GDP increased at the average annual rate of 2.0 percent from 2011 to 2014, revised downwardly from previously published reports of 2.3 percent real GDP growth for that period. From Q2 2011 to Q1 2015, real GDP growth was revised to an annual rate of 2.0 percent, down from the previously reported rate of 2.2 percent for that period, according to the BEA.

Real GDP growth for 2012 was revised downwardly by 0.1 percent down to 2.2 percent; for 2013, it was revised downwardly by 0.7 percentage points down to 1.5 percent; and for 2014, it was unchanged at 2.4 percent. The primary cause for the downward revisions was PCEs and government spending.

The advance Q2 estimate is based on source data that are incomplete and subject to further revision, according to the BEA. The BEA will release the second estimate for Q2, based on more complete data, on August 27.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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