ADVANCE Q2 GDP UP 1.9%, PRICE INDEX UP 1.1%
Q2 Advance GDP grew 1.9%, falling short of expectations and after a downwardly revised 0.9% rise in Q1.
The GDP Price Index was much lower than expected at 1.1%, the lowest since Q2 ‘98, from a downwardly revised 2.6% in Q1. The Core GDP Price Index grew 1.4% in Q2, down from 2% last quarter.
The PCE Price Index was up 4.2%, the highest since Q4 ‘07, while the Core PCE Price Index was up 2.1% from 2.3% last quarter.
Net exports surged 9.2% and were the largest driving force behind Q2 GDP, accounting for 2.42% of growth in Q2 from 0.8% in Q1. Imports fell 6.6%, the largest decrease since Q3 ‘01.
Q2 fixed private investment fell 14.8%, the largest decline since Q4 ‘06, but subtracted only 0.62% from GDP following a 1.12% subtraction in Q1. Residential fixed investment fell 15.6% in Q2 following a 25.1% decline in Q1.
Personal Consumption grew 1.5%, an improvement from 0.9% in Q1, despite a 3% decline in durable goods. Nondurable goods were up 4% and Services rose 1.1%. Consumer spending contributed 1.08% to Q2 GDP, an improvement from the 0.61% contribution in Q1.
Private business inventories fell $62.2bln, from $10.2bln in Q1, and shaved 1.92% from Q2 GDP after subtracting only a marginal amount in Q1. Government spending rose 3.4%.
Overall, Q2 GDP shows the benefits of the weaker USD via the boost in export and corresponding drop imports. The government stimulus package is also likely to have boosted personal consumption over the period.