Q2 GDP Shows Growth, But Not Strong Enough

While this number is lower than estimates, it is still a step in the right direction of getting back to a 3% normalized growth. Another issue is that 70% or so of GDP comes from how consumers spend their money. Another boost is that the negative 0.2% reading for the first quarter was revised to growth of 0.6%, which cumulatively brings the combined first and second quarter results more in-line with the expectations for the first quarter.

The Commerce Department is trying to work through the first quarter seasonality, an issue that the BEA is addressing. Still, the first of 2015 would show growth of about 1.5% versus 1.9% growth in the first half of 2014.

The price index for gross domestic purchases, measuring prices paid by U.S. residents, rose by 1.4% in the second quarter. That is versus a decrease of 1.6 percent in the first quarter.

While currency remains a huge issue for exporters today, the second quarter export growth was up 5.3% versus a drop of about 6% in the first quarter. Imports act as a drag on GDP, and they were up 3.5% in the second quarter versus up 7% or so in the first quarter.

Consumer spending was up by 2.9% in the second quarter versus a gain of 1.8% in the first quarter. Those lower gasoline prices have only recently started adding to spending, and consumers have had very choppy behavior during the first half. Other data:

• Durable goods increased 7.3 percent, compared with an increase of 2.0 percent.
• Nondurable goods increased 3.6 percent, compared with an increase of 0.7
  percent.
• Services increased 2.1 percent, the same increase as in the first quarter.

Government spending was up by 0.8% in the second quarter. That was up only 0.1% in the first quarter. That increase was at the state and local level.

While housing and residential investment was up 6.5% in the second quarter, that was after two quarters of growth being up 10%. Non-Residential fixed investment, business spending, was down by 0.6% in the second quarter after growth of 1.6% in the first quarter.