The Bureau of Economic Analysis said that real gross domestic product (GDP) increased 1.7 percent in the second quarter, up from its earlier estimate of 1.5 percent. The uptick was largely due to larger contributions from service-sector consumption and fixed investments.
At the same time, there were also some figures that were lower than originally stated, including nondurable goods consumption and inventory accumulation. The latter had been a net positive, but has now shifted to being a drag on overall output growth.
The big story as it relates to manufacturing is that activity slowed to a near-crawl. In the first quarter, the consumption of goods contributed 1.11 of the 2 percent growth in real GDP, or 55.5 percent of the total. The consumption of durable goods – particular in motor vehicles – represented 0.85 percent of this, and as such, they helped to propel the economy forward.
In the second quarter, though, there was no contribution from durable goods consumption, with reduced motor vehicle and furnishings spending. Nondurable goods purchases also fell between the quarters, with the net contribution dropping from 0.26 percent to 0.09 percent. The main driver of the positive growth for nondurables was petroleum spending. Regarding the revision, the durables had been a drag in the earlier estimate, so today’s figures are an improvement, albeit one that moves the sector to neutral; whereas, the nondurables spending contribution was revised slightly lower.
Other highlights were not drastically different than earlier reported. Net exports added 0.32 percentage points to growth, with the pace of export growth outpacing the increases in imports. Meanwhile, government continues to be a drag on growth, something that is expected to continue. With defense and state and local government spending cuts, government reduced real GDP by 0.18 percentage points. This was a slight improvement from the earlier estimate, which found the negative impact to be 0.28 percent.
Overall, these numbers do not drastically alter the current view of the economy. Manufacturers remain anxious about the current and future economic environment, with lagging sales, slowing global growth, and uncertainties about future fiscal policies hampering growth.
The second quarter data show some bright spots, including service spending, residential and nonresidential fixed investment, and exports. But, they also find that consumer spending dropped dramatically, particularly for durable goods. This is consistent with other data that find that individuals are also uneasy.
I continue to forecast real GDP growth of 2 percent for 2012. This suggests modest growth in the second half of this year, but there is also a lot of downward risks to this prediction, both for the coming months and for 2013.
Chad Moutray is chief economist, National Association of Manufacturers.