GDP Revised Upward
- Sep 30, 2011
Considering what a bumpy summer we had, a modest amount of good economic news now seems like a lot of good news. The U.S. Bureau of Economic Analysis offered one such tidbit on Thursday when it announced a final U.S. gross domestic product for the second quarter: an annualized increase of 1.3 percent. That’s up a little since the previous estimate of 1 percent, and it’s a fair amount better than the first quarter growth of 0.4 percent. So despite the economic hubbub and federal dysfunction, the economy managed to grow.
A number of factors drove the increase in GDP during the second quarter, such as “nonresidential fixed investment,” which includes commercial real estate and business equipment, personal consumption, exports and federal government spending. Working against a higher U.S. GDP were a drop in spending by state and local governments and sluggish private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
The BEA also reported that car sales subtracted 0.1 percentage points from the second-quarter change in GDP after adding 1.08 percentage points to the first-quarter change—keeping the total from being negative, in other words. Sales of computers added 0.07 percentage points to the second-quarter change in GDP, on top of a 0.08-percentage-point addition to the first quarter change.
A little good news on jobs, but not housing
Initial jobless claims for the week ending Sept. 24 were also a pleasant surprise. The weekly number of initial claims was 391,000, a decrease of 37,000 from the previous week’s revised figure of 428,000, and below the psychologically important mark of 400,000 for the first time since earlier this year. The four-week moving average was 417,000, a decrease of 5,250 from the previous week’s 422,250. But those are only weekly tallies. The nation will have to wait until next week for the official jobs report for the month September, since the first Friday of October isn’t until then.
On the other hand, pending home sales were down in August, according to the National Association of Realtors on Thursday. The organization’s Pending Homes Sales Index, which is based on contracts signed but not closed, dropped to 88.6 in August from 89.7 in July. Compared with a year ago, when the industry was in a post-homebuyer tax credit trough, the index this August 2011 was up 7.7 points.
The NAR chalked up much of the decline, at least in the Northeast, to the effects of Hurricane Irene. But other parts of the country saw a contraction in the number of pending home sales as well.
Economy still on tenterhooks
Is the good news just a happy minor fluke, or signs of a sustained recovery at last? Impossible to say at this juncture, but if the rocky course of this year is any indication, the economy’s going to be on egg shells a good while longer. A lot of things can upset it.
On Thursday, Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, speaking at the Business Leaders Forum of the Villanova School of Business, summed up 2011 so far. “We began the year with severe snowstorms in the East, then the earthquake and ensuing disasters in Japan, followed by the unrest in the Middle East and North Africa and the run-up in oil prices, and a lingering concern about sovereign debt in Europe,” Plosser said. “And all of that occurred before May. With the arrival of summer, we faced another round of problems with the worsening of the European sovereign debt crisis, as well as our own fracas on fiscal policy and the debt ceiling debates in Washington. These events all weighed heavily on business and consumer confidence.”
Wall Street had a curiously mixed day on Thursday, with the Dow Jones Industrial Average up 143.08 points, or 1.3 percent, and the S&P 500 up 0.81 percent. The Nasdaq went its own way, losing 0.43 percent.