The Bureau of Economic Analysis said that real GDP grew 2.5 percent in the second quarter. This was unchanged from the last revision to this data. The positive news was that growth was higher than the first quarter rate of 1.1 percent. Yet, U.S. output grew only at the 1.8 percent pace in the first half of the year, which was disappointingly slow.
Revisions in this report were minor, with slightly lower figures for inventories and exports but higher numbers for state and local spending. In general, these data show that consumer and business spending continue to prop up the economy, with the combination of the two contributing 2.62 percentage points to real GDP. Consumer purchases of goods alone added 0.71 percentage points, with goods spending up a decent 3.1 percent in the second quarter.
Weaknesses stemmed from net exports and government spending. Both exports and imports were up significantly in the second quarter, but these changes largely offset one another. Net exports subtracted 0.07 percentage points from real GDP.
Coincidently, government spending also reduced real GDP by 0.07 percentage points, with reductions in federal spending continuing to dampen growth. With that said, these subtractions have decelerated over the course of this year. The drag was 1.19 percentage points in the fourth quarter of 2012, followed by a negative contribution of 0.68 percentage points in the first quarter. Still, we would expect government to continue to be a negative on growth moving forward, particularly given budget austerity measures at the federal level.
Overall, the U.S. economy is growing, but not robustly. There are some indications that manufacturing activity and some other economic indicators have accelerated moving into the third quarter, and yet, persistent headwinds will prevent even faster growth. I anticipate real GDP growth of 2.0 percent for the third quarter.
Chad Moutray is the chief economist, National Association of Manufacturers.
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