Q2 GDP Grows at a Solid 3.4%

by: SA Eli Hoffmann

U.S. GDP, the output of goods and services produced by labor and property located in the United States, surged to an annual growth rate of 3.4% in the second quarter, the Commerce Department said today in a preliminary release. GDP for the first quarter was up a much weaker 0.6%. The comprehensive GDP release comes out August 30. Street estimates were for 3.3% annual growth. The increase is the economy's most substantial since Q1 2006, and came despite a sharp reduction in consumer spending -- which rose just 1.3% in Q2 vs. a stronger 3.7% increase in Q1. Consumer spending accounts for approximately 70% of the entire GDP. Residential fixed investment (housing) fell 9.3%, compared to a more severe 16% in Q1 and 17% in Q2 2006. International trade played a role: Exports were up 6.4% while imports fell by 2.6%; in Q1 exports rose only 1.1% while imports were up 3.9%. Business spending was up 8.1% vs. 2.1% in Q1. The Commerce Department emphasized that advance estimates are based on source data that are incomplete and subject to revision. Ellen Zentner of Bank of Tokyo-Mitsubishi UFJ Ltd.: "It was a pretty solid rebound. Exports are rising because world economic growth is racing along and the U.S. dollar is cheap."

Sources: BEA press release, Wall Street Journal, Bloomberg
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