U.S. GDP up 1.7 percent in second quarter

July 31 (UPI) &#8212 The U.S. Economy grew at an annual rate of 1.7 percent in the second quarter, the Commerce Department said in an advanced estimate Wednesday

The estimate is subject to revision as more data become available.

Just like Q1 was again revised down. Recall Q1 was initially forecast to be up about 3% (‘proving’ the year end tax hike fears were unwarranted). In what was deemed a bounce back from a cliff fear driven Q4, now reported at up only .1%.

The gross domestic product gained at a sharper rate than economists had expected. The consensus forecast called for a gain of 1.4 percent after a downwardly revised 1.1 percent growth in the first three months of the year.
First-quarter growth was reported as 1.8 percent.

Which was a downward revision from 2.5%.

Investments in commercial real estate, exports and a slowdown in government spending cuts contributed positively to the second-quarter estimate.

I wouldn’t count on exports adding much given the current global economy.

An upturn in state and local government spending partly offset an increase in imports, which subtracts from the GDP, the commerce department’s bureau of economic analysis said.

And the likes of Japan aggressively stepping up competition for our consumer $.

Real personal consumption expenditures rose 1.8 percent in the second quarter after increasing 2.3 percent in the first.

Decelerating as tax hikes and sequesters permanently remove that income.

spending on:
— durable goods rose 6.5 percent after a 5.8 percent increase in the first quarter.
— non-durable goods rose 2 percent, a slowdown from a 2.7 percent increase in the first quarter.
— services rose 0.9 percent, a drop from a 1.5 rise in the first quarter.

See charts:
1. Today’s mtg purchase apps release a bit alarming?
2. Personal consumption paying the price of higher taxes and sequesters
3. Core PCE down sharply

And

4. Take a look at year over year household survey employment ahead of Friday’s numbers. In this survey someone holding 2 part time jobs, for example, is ‘one person working’ while in the non farm payroll numbers it would count as ‘two jobs’.

So far the releases fit the narrative. Tax hikes and sequesters remove govt deficit spending that was offsetting ‘Demand leakages’. For GDP growth to increase, some other agent needs to spend more than his income. If not, output goes unsold leading to cuts in output/employment etc. Note, in line with the narrative, inventory accumulation added about .4% to Q2 GDP in this report.

At the macro level, it’s going to take more deficit spending- either public or private- to sustain growth and employment. And with any growth comes govt deficit reduction via the automatic stabilizers, thus requiring that much more deficit spending from other agents.

Mortgage Purchase Applications

Personal Consumption

Core PCE Deflator

Household Employment Survey YoY