Q2 GDP Fell 0.7%, Better than Forecasts

GDP in the second quarter was unexpectedly pushed up in the final revisions released today. Forecasters were looking for the originally reported dip of -1.0% to be revised down to -1.2%, but instead it came in at -0.7%.

No major category was responsible for the better-than-expected figure. Analysts at RDQ said “broad-based but small upward revisions” were responsible as the recession drew to a close.

“With no significant revision to second-quarter inventory investment, we remain of the view that third-quarter real GDP growth will be close to 3.5%,” they said.

Not all revisions were positive though. Profit growth was revised down by two percentage points to 3.7%, while business fixed investment was -9.6% compared to an original projection of -10.9%, and real residential investment is now down -23.3% from -22.8%.

Inventories remained down 1.4%, which implies the strength of the report came from better sales growth than earlier estimates.

“Overall the report suggests growth had slightly more upward momentum during the second quarter than we previously had thought,” said economists from Nomura, who said the report had positive implications for the near-term outlook.

The 0.7% decline in gross domestic product follows a 6.4% decline in Q1 and a -5.4% drop in Q4 2008. The current quarter, which concludes today, is widely expected to be in the range from +2.5% to +5.0%, suggesting that the recession has come to a technical end. 

Government officials have stressed that any recovery will be long and bumpy though, with unemployment continuing to rise for the coming months.

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