Commerce downgrades Q2 U.S. economic growth projection

U.S. gross domestic product increased 1.1 percent in the second quarter of 2016, according to the “second” estimate from the Department of Commerce, following a revised increase of just 0.8 percent in the first quarter.    United States gross domestic product (GDP) – the broadest measure of a nation’s overall economic health – increased 1.1 percent during second quarter 2016, up from a revised 0.8 percent advance in the first quarter. GDP is a calculation of the value of the goods and services produced by a nation’s economy minus the value of the goods and services used up in production.
   Commerce’s first “advance” estimate pegged Q2 GDP growth at 1.2 percent.
   The department’s Bureau of Economic Analysis (BEA) said that despite the 0.1-percentage point downward revision to second quarter GDP growth, the general economic picture in the U.S. remains the same. The downward revision to real GDP growth reflected minor downward revisions to state and local government spending and private inventory investment, as well as an upward revision to imports, which are a subtraction in the calculation of GDP.
   BEA attributed the 1.1 percent increase in real GDP in the second quarter primarily to positive contributions from personal consumption expenditures (PCE) and exports, which were offset by negative contributions from private inventory investment, residential fixed investment, state and local government spending, non-residential fixed investment and an increase in imports.
   Real exports of goods and services grew 1.2 percent in the second quarter, according to the bureau, compared with a 1.4 percent increase in its “advance” estimate last month. Meanwhile, imports grew 0.3 percent, compared with a previously predicted 0.4 percent decline.
   U.S. export growth has been held in check by a strong dollar, which makes U.S. exports more expensive and, therefore, less desirable abroad, as well as declining demand in China and Europe.
   For the full year in 2015, U.S. GDP increased 2.4 percent – the same rate as in 2014.
   On a brighter note, additional new data from Commerce regarding the U.S. manufacturing sector seemed to indicate the slowing economic growth in the second quarter could be easing.
   New orders for durable goods in July grew 4.4 percent to $228.9 billion following two consecutive monthly decreases, according to an advance estimate from the U.S. Census Bureau. Durable goods orders fell a revised 4.2 percent in June and 2.8 percent in May after a increases of 3.3 percent and 1.9 percent in April and March, respectively.
   The monthly increases in April and March, however, were preceded by decreases in three of the previous four months. January durable goods orders showed 4.3 percent growth, but came on the heels of a 4.6 percent decrease in December 2015 and a 0.5 percent decline in November. Orders in February fell another 3.1 percent.
   Transportation equipment led the July increase, up 10.5 percent, or $7.5 billion, to $78.9 billion after declining for two straight months. Census noted that excluding transportation, new orders increased just 1.5 percent in July.