2Q2015 Gross Domestic Product: Third (Final) Estimate

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In its third (“final”) estimate of 2Q2015 U.S. gross domestic product (GDP), the Bureau of Economic Analysis (BEA) reported that the economy was growing at a 3.92% annualized rate, up +0.22% from previous 2Q estimate and up +3.28% from 1Q. The consensus among economists was for the growth rate to be left unchanged at 3.7%. A better metric involves comparing growth to the same quarter one year ago. For 2Q2015, the year-over-year growth was 2.7% -- down from 1Q2015's 2.9% YoY growth.

All groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed to 2Q growth. 

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The BEA made significant upward revisions to the 2Q growth rate contributions from consumer spending on services (+0.30%) and commercial fixed investment (+0.17%). The contribution from inventory growth, by contrast, was revised downward by 0.20% -- slashing the record $136.2 billion (nominal SAAR) QoQ increase reported last month to a mere $0.2 billion in this month’s report. All other segments of the economy were left essentially unchanged.

“Once again the BEA is reporting solid economic growth for the U.S. economy during 2Q2015,” wrote Consumer Metrics Institute. “Presumably, the Federal Reserve’s Open Market Committee (FOMC) had all of this information available during its latest deliberations on ‘normalizing’ its benchmark interest rates. One might wonder how a nearly 4% official economic growth rate (with unemployment significantly under 6%) merits continued pedal-to-the-metal interest rate stimulus. Which in turn raises the question: What do they know about the economy that isn't reflected in the BEA's report? Or perhaps more to the point: If it is not the U.S. economy or employment that spurs caution within the FOMC, has the Federal Reserve now taken upon itself new global or financial market mandates quite apart from those imposed by Congress?”

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.