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 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.
Let's stop right there. First quarter GDP was originally reported at 1.8%, which has now been revised down by over 1.5%. That's a huge revision and indicates the first quarter was a period of near contraction.
Real personal consumption expenditures increased 0.1 percent in the second quarter, compared with an increase of 2.1 percent in the first. Durable goods decreased 4.4 percent, in contrast to an increase of 11.7 percent. Nondurable goods increased 0.1 percent, compared with an increase of 1.6 percent. Services increased 0.8 percent, the same increase as in the first.
The consumer has pretty much dropped out of the economic picture, pulling in his spending in reaction to the slow macro and employment environment. That means 70% of the economy is no longer participating, which is a huge problem. Most importantly, the 4.4% drop in durable goods purchases indicates the consumer is deeply concerned about the future and is avoiding long-term financial commitments. The durable goods data point also explains the sharp cancellation in exisitng home sales contracts in the latest report.
Real nonresidential fixed investment increased 6.3 percent in the second quarter, compared with an increase of 2.1 percent in the first. Nonresidential structures increased 8.1 percent, in contrast to a decrease of 14.3 percent. Equipment and software increased 5.7 percent, compared with an increase of 8.7 percent. Real residential fixed investment increased 3.8 percent, in contrast to a decrease of 2.4 percent.
This has been one of the bright spots in the economy during this recovery -- and continues to be. Over at Macroblog, David Altig has a nice post on this topic and concludes thusly:
That difference in the growth of consumption across the early quarters of recovery after the 1990–91 and 2001 recessions with little discernible difference in GDP growth across those episodes illustrates the pitfalls of mechanically focusing on specific categories of spending. In fact, the relatively slower pace of consumer spending in this expansion has in part been compensated by a relatively high pace of business spending on equipment and software:
Real federal government consumption expenditures and gross investment increased 2.2 percent in the second quarter, in contrast to a decrease of 9.4 percent in the first. National defense increased 7.3 percent, in contrast to a decrease of 12.6 percent. Nondefense decreased 7.3 percent, compared with a decrease of 2.7 percent. Real state and local government consumption expenditures and gross investment decreased 3.4 percent, the same decrease as in the first.
The drop in government spending is probably a big contributor to the drop in first quarter GDP (consider that a hint to Washington which will go completely unheeded).
This report stinks all around; there is no good news contained therein. The economy was near stall speed in the first quarter and is barely moving forward in the second.
