2Q2015 Gross Domestic Product: First (Advance) Estimate

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The Bureau of Economic Analysis (BEA) estimated 2Q2015 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of 2.32%, up 1.68 percentage points from 1Q2015’s revised +0.64% (2.49 percentage points higher than the -0.17% reported for 1Q in July). All groupings of GDP components contributed to 2Q growth: Personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE). 

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The revision to 1Q's “final” estimate was accompanied by revisions to all quarters back through 2012. On average the revisions trimmed 0.22 percentage point from previously reported growth rates. However, several quarters were more materially revised -- with 3Q2012 slashed by nearly 2.0% and 1.5% from 3Q2013. Output for 1Q2014, on the other hand, was upgraded to -0.9% instead of -2.1%. The prior figure represented the worst contraction on record outside of a recession; now the new number is not even the worst quarterly contraction of the expansion (that “honor” falls to 1Q2011’s -1.5%). Overall, though, “the economic expansion -- already the worst on record since World War II -- is weaker than previously thought,” The Wall Street Journal observed.

In 2Q, nearly all major categories of economic activity had positive contributions to the headline number -- consumer goods: +1.04%; consumer services: +0.95%; exports: +0.67%; imports: -0.54%; fixed investment: +0.14% (the weakest since 2Q2012); governmental spending: +0.14%; inventories: -0.08%. Real final sales of domestic product (the BEA’s “bottom-line” metric for the economy’s health, and which excludes inventories) was estimated at a +2.40% growth rate.

Real annualized per capita disposable income was reported to be $37,846, or $364 per year less than 1Q’s $38,210 -- which itself was revised downward by $437 (over 1%). Meanwhile, the household savings rate plunged to 4.8% -- down 0.7% from 1Q’s 5.5%; this implies consumers dipped into savings to maintain their current level of activity.

For this report the BEA assumed an annualized deflator of 2.04%. Concurrent inflation, recorded by Bureau of Labor Statistics in its CPI-U index, was 3.52%. Underestimating inflation results in an overstatement of actual growth rates; if the BEA's nominal data was deflated using CPI-U inflation information the headline number would show a more modest +0.89% growth rate.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.