August 28, 2014

In the second quarter, GDP increased at a seasonally adjusted annualized rate (SAAR) of 4.2%, according to the second estimate released by the Bureau of Economic Analysis (BEA) on 28 August. The print marked a slight upward revision from the 4.0% expansion reported in the advance estimate and also beat market expectations of a 3.9% increase. The revised second quarter reading, which represented the third-strongest result since before the financial crisis, mainly reflected that the increase in non-residential fixed investment was greater than initially reported. The latest Q2 data reflect broad-based economic strength and suggest that the recovery is back on track after a dismal Q1.



On the domestic side of the economy, private consumption rose 2.5%, which was unchanged from the advance estimate. Non-residential fixed investment jumped from a 1.6% increase in Q1 to an 8.4% expansion in Q2 (advance estimate: +5.5% quarter-on-quarter SAAR). Meanwhile, residential fixed investment grew 7.2% (advance estimate: +7.5% qoq SAAR). Government spending grew 1.4% in Q2 (advance estimate: +1.6% qoq SAAR).



On the external front, exports were revised up, while imports were revised down. According to the second estimate, exports increased a robust 10.1% in Q2 (advance estimate: +9.5% qoq SAAR). This marked a significant turnaround from the 9.2% contraction registered in Q1. Imports increased 11.0% in the second quarter (advance estimate: +11.7% qoq SAAR). As a result of the growth in exports, the external sector’s net contribution to overall growth was revised up from minus 0.6 percentage points to minus 0.4 percentage points.

The Federal Reserve expects economic growth to range between 2.1% and 2.3% in 2014 and between 3.0% and 3.2% in 2015. FocusEconomics Consensus Forecast panelists expect GDP to expand 2.0% in 2014, which is up 0.1 percentage points from last month’s forecast. For 2015, the panel expects the economy to expand 3.1%.