The second revision to real GDP growth for the second quarter changed slightly from its last estimate. The Bureau of Economic Analysis upped its estimate of growth in the U.S. economy in the second quarter from 3.0 percent to 3.1 percent. While there were small tweaks in a few areas, the higher figure mainly corresponded with slightly better spending on inventories.
I continue to anticipate 2.2 percent growth for 2017 as a whole. However, Hurricanes Harvey, Irma and Maria will impact forecasts for the third and fourth quarters. I expect 2.3 percent growth in the third quarter, with weather reducing overall output by at least 0.5 percent in the current quarter. However, fourth-quarter growth will be better than predicted originally as the tremendous damage is repaired in Florida, Texas and the Caribbean. I estimate 3.0 percent growth in the fourth quarter—at least for now.
Looking specifically at the second-quarter data, here are some highlights:
- Personal consumption expenditures rose 3.3 percent in the second quarter, accelerating from the 1.9 percent pace in the first quarter on an increased willingness to purchase goods. Along those lines, durable goods spending was marginally negative in the first quarter with consumers more cautious but jumped 7.6 percent at the annual rate in the second quarter. With that said, spending on motor vehicles remained softer than desired.
- Nonresidential fixed investment increased 6.7 percent in the second quarter, extending the 7.2 percent growth rate from the first quarter. Most promisingly, equipment spending soared in the latest data to its fastest pace since the third quarter of 2015, up 8.8 percent, with 7.0 percent growth in structures spending.
- Residential investment fell 7.3 percent, pulling back from strong gains in the previous two quarters. At the same time, private inventories stabilized in the second quarter but added just 0.12 percentage points to headline growth. The drag came mainly from the farm sector.
- The trade picture has improved so far in 2017 relative to challenges across the past two years, with positive contributions to real GDP in both the first and second quarters. Goods exports increased 2.2 percent in the second quarter, with goods imports up 1.3 percent. The export of services rose 6.2 percent in this release. Therefore, net exports added 0.21 percentage points to real GDP growth.