GDP grew by 1.7% in Q2, while data for the previous two quarters were revised down from already low readings. This confirms that households managed to overcome the fiscal drag. But activity remains too sluggish for comfort. In particular, the pace of price increase is very limited, and far too close to zero for the Fed’s comfort.
■ The US economy expanded at a quarterly annualised rate of 1.7% in Q2 2013, after a revised 1.1% in Q1 and 0.1% in Q4 2012, both having been revised downwards. Households’ spending remains the main source of growth, while governments kept on cutting back on expenditure. Business reaccelerated investment and inventory building, and the acceleration in domestic demand pushed up imports, making international trade weighing on the overall GDP growth figure.
■ Despite the end of the payroll tax holiday and the increase of income tax rates on the wealthiest, Americans kept their consumption on a steady, if not that impressive regarding historical standards, growth path. After a quarterly annualised growth of 2.3% in Q1, PCE expenditures gained 1.8% in Q2, while the rebound in residential investment kept gaining momentum: this component of demand grew by 13.4% in Q2, the fourth quarter of double-digit rate of growth.
■ After a sluggish first quarter, businesses accelerated spending on both fixed investment (structures +6.8%, equipment and software +4.1%) and inventory building (adding 0.4 points to GDP growth).
■ While private domestic purchases grew an annualised 3.1% in Q2 (the fastest pace since Q1 2012), government spending contracted for the third quarter in a row, albeit at a more limited pace (-0.4%) than previously (average 5.4% decline in Q1 2013 and Q4 2012). This was the result of federal spending as expenditure from state and local governments rebounded, up an annualised 0.3%.
■ The dynamism of private domestic demand also led to a mark acceleration in imports that grew 9.5%, cutting GDP growth by 1.4 points. As exports also accelerated, to a lesser extent (+5.4°), the overall contribution from net exports was -0.7 points.
■ Today’s data are not that positive. For sure, they confirm that households managed to overcome the fiscal drag. But activity remains too sluggish for comfort. In particular, the pace of price increase is very limited, and far too close to zero for the Fed’s comfort.
BY Alexandra ESTIOT
To Read the Entire Report Please Click on the pdf File Below.
■ The US economy expanded at a quarterly annualised rate of 1.7% in Q2 2013, after a revised 1.1% in Q1 and 0.1% in Q4 2012, both having been revised downwards. Households’ spending remains the main source of growth, while governments kept on cutting back on expenditure. Business reaccelerated investment and inventory building, and the acceleration in domestic demand pushed up imports, making international trade weighing on the overall GDP growth figure.
■ Despite the end of the payroll tax holiday and the increase of income tax rates on the wealthiest, Americans kept their consumption on a steady, if not that impressive regarding historical standards, growth path. After a quarterly annualised growth of 2.3% in Q1, PCE expenditures gained 1.8% in Q2, while the rebound in residential investment kept gaining momentum: this component of demand grew by 13.4% in Q2, the fourth quarter of double-digit rate of growth.
■ After a sluggish first quarter, businesses accelerated spending on both fixed investment (structures +6.8%, equipment and software +4.1%) and inventory building (adding 0.4 points to GDP growth).
■ While private domestic purchases grew an annualised 3.1% in Q2 (the fastest pace since Q1 2012), government spending contracted for the third quarter in a row, albeit at a more limited pace (-0.4%) than previously (average 5.4% decline in Q1 2013 and Q4 2012). This was the result of federal spending as expenditure from state and local governments rebounded, up an annualised 0.3%.
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■ The dynamism of private domestic demand also led to a mark acceleration in imports that grew 9.5%, cutting GDP growth by 1.4 points. As exports also accelerated, to a lesser extent (+5.4°), the overall contribution from net exports was -0.7 points.
■ Today’s data are not that positive. For sure, they confirm that households managed to overcome the fiscal drag. But activity remains too sluggish for comfort. In particular, the pace of price increase is very limited, and far too close to zero for the Fed’s comfort.
BY Alexandra ESTIOT
To Read the Entire Report Please Click on the pdf File Below.
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