From the Bureau of Economic Analysis (BEA; bold is mine):
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.4 percent in the second quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent. (Note: BEA is incorrect about the final 1Q07 figure, which is 0.7%. — Ed.)
The Bureau emphasized that the second-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The second-quarter “preliminary” estimates, based on more comprehensive data, will be released on August 30, 2007.
As noted previously, given the continued expansions announced in all three months of the quarter in the Institute for Supply Management’s Manufacturing and Non-Manufacturing reports, along with steady employment growth, this acceptable GDP result seemed inevitable.
Of course, there are two more revisions to come — in August, as BEA notes, plus a final one in September.
As has been the case so often in the past five or so years, the report came in ahead of expectations, which were for 3.2%.
UPDATE: Here’s BEA’s quick look at the detail –
The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, exports, nonresidential structures, federal government spending, and state and local government spending that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.
….. The real change in private inventories added 0.15 percentage point to the second-quarter change in real GDP after subtracting 0.65 percentage point from the first-quarter change.
The first GDP report for the quarter isn’t showing the inventory bounceback I was thinking might take place, but inventory “surprises,” if they exist, normally don’t get picked up until the second or third release. I suspect/hope that you’ll see at least a couple of tenths on the upside from this factor when the August and September revisions are released. Of course, I thought the bounceback might occur in the first quarter, and it didn’t, so maybe it’s not coming at all — which begs the question of how in the world companies have managed to reduce inventories substantially and perhaps permanently.
UPDATE 2: I want to mention a couple of things about the prior-period revisions that accompanied the BEA’s report today.
First, GDP growth in 2004 (from 3.9% to 3.6%), 2005 (from 3.2% to 3.1%), and 2006 (from 3.3% to 2.9%) were all revised a bit downward. Though I don’t have the detail, I believe the trend in such after-the-fact revisions by BEA has been consistently downward for well over a decade.
Second, the other revisions that I bet won’t get much media play are to disposable income. The are in the UP direction, and of the same magnitude as the GDP decreases:
The average annual rate of growth of real disposable personal income for 2003-2006 was 2.8 percent, 0.3 percentage point more than in the previously published estimates.
UPDATE 3: Sure enough, The Associated Press’s initial coverage of today’s BEA release reports the GDP revisions and ignores the disposable income changes. Text that was clearly prepared in advance also harps on the President’s low polling on economic stewardship and a free commercial for the opposition –
Trying to capitalize on that, Democrats have accused the president of not doing enough to help close the gap between low- and high-wage workers.
AP obviously missed this mid-July BizzyBlog post — “The Meme That Wonâ€™t Die: Growing Income Inequality’.”