GDP produces lackluster growth in Q2


The Gross Domestic Product, that is, the value of everything a nation produces, increased by an annual rate of 1.1% in the second quarter, according to the “second” estimate released by the Bureau of Economic Analysis.

This is up from the first quarter, when real GDP increased 0.8%.

In the first prediction, BEA predicted that in the second quarter of 2016, the nation’s GDP grew at a rate of 1.2% from last year.

The GDP estimate released today is based on more complete source of data than was available for the advance estimate issued last month.

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(Source: U.S. Bureau of Economic Analysis)

“The disappointing 1.2% annualized gain in second-quarter GDP growth, combined with the downward revisions to gains in the preceding two quarters, make a September interest rate hike much less likely,” Capital Economics Chief Economist Paul Ashworth said about the first estimate for the second quarter.

“Over the past 12 months, the economy has expanded by only 1.2%,” Ashworth said. “What is really worrying is that pace has still been enough to reduce the unemployment rate further, suggesting that the economy’s potential growth rate could conceivably be close to zero.”

This small increase was not unexpected, and while some of the headwinds that restricted first-quarter GDP growth will disappear in the second half of the year, it would still take a lot to salvage GDP for 2016, a report from Capital Economics stated in response to the first quarter’s GDP growth.

The increase is mainly due to positive contributions from personal consumption expenditures and exports, but these were partially offset by negative contributions from private inventory investment, residential fixed investment, state and local government spending and nonresidential fixed investment.

Imports, which are a subtractions in the calculation of GDP, increased.

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