Advance Estimate of GDP for 2010:Q2 and GDP Revisions

Today’s report shows that real GDP, the total amount of goods and services produced in the country, grew at a 2.4% annual rate in the second quarter of this year, the fourth straight quarter of positive growth.  Growth in the first quarter was revised up to 3.7%, meaning that growth has averaged over 3% for the first half of 2010.  This solid rate of growth indicates that the process of steady recovery from the recession continues.  Nevertheless, faster growth is needed to bring about substantial reductions in unemployment.  Much work clearly remains to be done before the U.S. economy is fully recovered.  The comprehensive data revisions released with the report provide further evidence of just how severe the recession has been: the fall in GDP between 2007:Q4 and 2009:Q2 was 4.1%, making this the deepest recession since 1947.

Recent Growth

The overall growth of GDP in the second quarter of 2.4% was divided across the various components of output and demand in a way that suggests balanced recovery.  Consumer expenditures rose at an annual rate of 1.6%, down slightly from the first quarter, but more rapid than in the fourth quarter of last year.  Fixed investment (that is, investment in nonresidential structures, equipment and software, and housing) grew at an annual rate of 19.1%, the fastest pace since 1983.  Business investment in equipment and software increased by over 20% for the second consecutive quarter, indicating a welcome return to investment by private firms.  Inventory investment contributed just over 1 percentage point to GDP growth, substantially less than in the previous two quarters.  Thus, the steady growth occurred with relatively little inventory bounce.
 
In addition to the solid growth in the second quarter, real GDP growth in the first quarter was revised up substantially to 3.7%.  Growth has averaged over 3% for the first half of the year.

Moderate, sustained GDP growth is a vast improvement over the terrible declines in GDP of late 2008 and early 2009, and reassuring given the turbulence in financial markets following debt problems in Europe