Second Quarter GDP

The pace of the economy picked up some momentum between April and the end of June according to the Bureau of Economic Analysis (BEA). This is the preliminary estimate, so there will definitely be adjustments to the tally in the coming months. For now, it appears that the economy grew at an inflation-adjusted annualized pace of 1.7 percent.

The growth rate is not very favorable. At this pace, the economy remains susceptible to outside shocks like natural disasters or geopolitical conflicts. The rate of change looks even worse after one considers that the downwardly revised first quarter figure was needed to help the second quarter look better; after more data was collected, the BEA determined that the economy only grew by 1.1 percent in the first quarter instead of the 1.8 percent reported by the group in the “final revision” from a month earlier.

Mathmagic aside, there were positives in the initial second quarter release. Companies invested more in the quarter; nonresidential fixed investment swung from -4.6 percent in the first quarter to +4.6 percent in second. Exports also swapped signs as they were up 5.4 percent in the second quarter after being down 1.3 percent in the first three months of the year. Government spending decreased by less and may suggest the sequestration impacts on GDP are beginning to fade from the statistic. Companies drew down their inventories in the quarter as they sold more than what was produced in the period. This bodes well for output in the future as companies will need to restock their shelves. Consumers appear to have lost some enthusiasm in the period as the rate of growth for personal consumption expenditures slipped.

Overall the economy remains lukewarm. The pace of growth, at just 1.43 percent in the last 12 months, has been diminishing on a year-over-year basis which causes some concern at Atlas. It is just an observation, but this level of output growth is generally seen in the periods leading up to a recession. (by C. Cox)