Jumpin’ GDP: 2nd Quarter Growth at 4.0%

That’s REALLY More Like It.

Here are excerpts from the BEA press release (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 4.0 percent in the second quarter of 2007, according to preliminary estimates released by the Bureau of Economic Analysis.

….. 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, state and local government spending, and equipment and software that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP growth in the second quarter primarily reflected a downturn in imports, upturns in federal government spending and in private inventory investment, accelerations in exports and in nonresidential structures, and a smaller decrease in residential fixed investment that were partly offset by a notable deceleration in PCE.

The real change in private inventories added 0.21 percentage point to the second-quarter change in real GDP, after subtracting 0.65 percentage point from the first-quarter change.

The bolded items appear to reflect at least a bit of the inventory bounceback I was hoping for after last month’s 3.4% announcement.

Larry Kudlow’s clan almost called it two weeks ago:

Economists David Malpass and John Ryding at Bear Stearns believe second-quarter GDP will be revised up from 3.4 percent to over 4 percent.

Well, they don’t have the “over” part in place yet. But one revision remains.

Keep in mind that the overall economy grew at 4% during the second quarter despite the residential construction drag (down 11.6% on an annualized basis during the quarter). It’s not unreasonable to characterize the rest of the economy as “on fire.” Nonresidential construction (up 27.7%) is going bananas, and I have heard real-world anecdotes to back that up.