The Burea of Economic Analysis (BEA) released their first estimate of second quarter real GDP growth and the economy showed a modest rebound from the low first quarter growth. Second quarter real GDP is estimated to have grown at a 2.3% annual rate. This is lower than the 2.5% consensus estimate from economists surveyed by Bloomberg. As a reminder, this is the first estimate with two revisions to occur over the next two months. The BEA also announced that they revised up first quarter GDP growth from (.2%) to .8%. The upward revision was due to upward revisions to nonresidential fixed investment (commercial construction), inventories and residential fixed investment (housing). Government spending and personal spending were both revised downward.
The BEA also announced revisions to annual GDP data back to 2011. What we have now learned is that the economy grew slower than what was originally reported.
Looking at the details behind the estimated growth rate in the second quarter of 2015 shows that personal spending accounted for virtually all of the 2.3% growth.
The GDP news does not provide any significant additional information for the Federal Reserve as it comes to when they will raise interest rates. The news shows progress and improvement from the first quarter but the Federal Reserve will be more focused on what type of improvement is shown in the economic data for July and August.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.