GDP Q2 Advance Estimate Beats Expectations At 1.7%

The Advance Estimate for Q2 GDP was a better-than-expected to 1.7 percent. However, Q1 GDP was revised down from 1.8 percent to 1.1 percent. Both Investing.com had forecast 1.0 percent and Briefing.com expected 1.1 percent. Yesterday's release includes major historical revisions, which I'll examine in more detail in a subsequent post.

Here is an excerpt from the Bureau of Economic Analysis news release:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent (revised).

The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and "Comparisons of Revisions to GDP" on page 18). The "second" estimate for the second quarter, based on more complete data, will be released on August 29, 2013.

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the second quarter primarily reflected upturns in nonresidential fixed investment and in exports, a smaller decrease in federal government spending, and an upturn in state and local government spending that were partly offset by an acceleration in imports and decelerations in private inventory investment and in PCE. [Full Release]

Here is a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I've also included recessions, which are determined by the National Bureau of Economic Research (NBER).

Here is a close-up of GDP alone with a line to illustrate the 3.2 average (arithmetic mean) for the quarterly series since the 1947, with the latest GDP revisions, this number had been at 3.3 for 14 quarters, but slipped to 3.2 in Q4 of 2012. I've also plotted the 10-year moving average, currently at 1.7. The current GDP is now tied with the moving average.

Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe.

Perhaps the most telling representation of slowing growth in the US economy is the year-over-year rate of change. The latest data point is lower than the onset of all recessions except the one that started in January 1980, with which, at two decimal places, it's tied.

And for a bit of political trivia, here is a look at GDP by party in control of the White House and Congress.

In summary, the Q2 GDP Advance Estimate of 1.7 percent was higher than expectations. Equally surprising was the downward revision of the previous quarter from 1.8 to 1.1 percent.