U.S. updates historical GDP, 2Q up 1.7%

   U.S. Gross Domestic Product increased 1.7 percent in the second quarter, up from 1.1 percent in the first quarter of 2013, according to an initial estimate by the Bureau of Economic Analysis.
   The main drivers of productivity gains in the quarter were exports, a smaller decrease in government spending, an upturn in state and local government spending and nonresidential fixed investment that were partly offset by higher imports and decelerations in private inventory investment and consumer spending.
   Exports of goods and services increased 5.4 percent in the April-June period compared to a decrease of 1.3 percent in the first quarter. But imports, which are not considered an output of the U.S. economy and are subtracted from the estimate, grew 9.5 percent compared with an increase of 0.6 percent in the first quarter.
   GDP is the broadest benchmark for measuring economic activity.
   Meanwhile, a BEA revision in how it calculates GDP shows the economy during and after the recession was not as bad as previously thought. 
   During the recession the economy shrank 2.9 percent instead of 3.2 percent and from the second quarter of 2009 through 2012 the average annual growth rate of real GDP was 2.4 percent, 0.3 points higher than previously estimated. Last year’s GDP was revised up by 0.6 points to 2.8 percent.
   The new calculations are based on the BEA changes in definitions and statistical methodologies, the most important of which are the inclusion of entertainment and research and development expenditures.
   As for the global economy, the International Monetary Fund last month pulled back on its optimism for growth. The global economy is now expected to increase about 3.1 percent, which is down 0.2 percent from the lending institution’s forecast in April. The World economy grew 3.1 percent too last year and 3.9 percent in 2011.
   A slowdown in emerging economies is largely responsible for the more cautious figures. The IMF said developing economies are expected to grow 5 percent this year, down from April’s 5.3 percent estimate. Next year emerging economies are forecast to grow 5.4 percent, which is also down from the previous estimate of 5.7 percent.
   All the BRICS countries – Brazil, Russia, India, China and South Africa – are expected to see slower than expected growth. Growth in China is forecast to be 7.8 percent, a downward revision of 0.3 percent.
   The IMF predicts the U.S. economy will grow 1.7 percent in 2013, a downward revision of 0.2 percent, and rebound to 2.7 percent next year. The euro area is expected to contract 0.6 percent, a worsening of 0.2 percent from the previous estimate.
   The under-performance of emerging economies partly reflects a decrease in exports as advanced economies struggle with their own economic woes, the IMF said. Emerging markets will continue to grow faster than advanced economies, but the growth will be much slower than before the financial crisis because inflation is flat and not adding to their earnings. – Eric Kulisch