US Q2 GDP rises 1.9% on exports, consumer buys

31 July 2008 15:52  [Source: ICIS news]

WASHINGTON (ICIS news)--US GDP grew at an annual rate of 1.9% in the second quarter, the Commerce Department said on Thursday, moving ahead of the revised but still anaemic first-quarter expansion of 0.9%.

 

The department said that the second-quarter advance in output of goods and services produced by labour and property in the US was due chiefly to increased exports, declining imports and gains in consumer spending and government purchases at national and local levels.

 

Those improvements were partly offset by declines in residential fixed investment - meaning the continuing slump in US residential housing - and business investment in equipment and software.

 

However, in its initial report on second-quarter performance the department said that the decline in housing was smaller than in earlier quarters.

 

Real personal consumption expenditures (PCE), the department’s term for consumer spending, increased 1.5% in the second quarter compared with an increase of 0.9% in the first three months of this year.

 

Consumer spending is closely watched because it accounts for as much as 70% of US economic activity. However, whether the second quarter’s improvement in personal expenditures suggests a turnaround is questionable.

 

That gain in consumer spending is thought to reflect at least in part the $150bn (€96bn) economic stimulus package passed by Congress and approved by President George Bush in January.

 

About $100bn in rebate checks were sent out to US taxpayers beginning in May and June, but the effect of that stimulus package is likely wearing off now. Congress is contemplating another pump-priming relief measure for taxpayers.

 

The rise in personal expenditures during April-June also may reflect sharply increased fuel costs seen in the quarter.  Prices for US retail sales of gasoline rose steadily through the second quarter and peaked at just over $4/gal in the first week of July, but they have since moderated.

 

Although the GDP gain of nearly 2% in the second quarter stands as a marked improvement from the first quarter, that rate of expansion is still below trend growth of 3% that is generally regarded as the norm for a healthy and growing economy.

 

($1 = €0.64)

 

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By: Joe Kamalick
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