By Kimberly Amadeo. US Economy Expert
Kimberly Amadeo clarifies economic and business news. She explains how these trends affect you and, most important, the steps you need to take so you can profit now.
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GDP. or Gross Domestic Product, is updated each month by the Bureau of Economic Analysis (BEA ). It describes how fast the economy grew in the last quarter. The ideal growth rate is between 2-3%. This is fast enough to provide enough jobs but not so fast it will create inflation
Each quarterly report gets three releases:
- Advance Estimate: Released one month after the quarter ends. This can often be wildly different from the final report, simply because all of the trade and business inventory data is not in yet.
- Second Estimate: Comes out two months after the quarter. This is usually pretty realistic.
- Third Estimate: Released three months after the quarter. Usually only tweaks the Second Estimate.
The BEA also made the following revisions:
- July 30, 2015 - All figures since Q1 2012, and some figures since 1976.
- July 30, 2014 - All figures since Q1 2011, and some figures since 1999.
- July 31, 2013 - All figures since 1929 based on improved estimates of intellectual property values and pensions.
- July 27, 2012 - All figures since Q1 2009.
- Advance - Economic growth was a welcome 2.3%, driven by a 7.3% gain in consumer durable goods like automobiles, furniture and appliances. Non-durable goods rose 3.6%, while spending on services rose 2.1%. As a result, overall consumer spending was 2.9%. Business spending rose as scant 0.3%, dragged down by a 4.1% decline in equipment investment, and a 1.6% drop in commercial construction. Exports rose 5.3%, despite a strong dollar. A glut in oil inventories kept a lid on imports. which only rose 3.5%. Government spending increased only 0.8%, thanks to a 1.1% drop in federal spending, including a 1.5% cutback in military spending .
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Q1: 0.6% (-0.2%)
- Advance - Thanks to winter storms, growth was just 0.2%. Consumer spending was just 1.9%. Business spending rose 2.0%, with commercial building down 23.1%, but offset with a 1.3% gain in housing construction. The strong dollar walloped exports. which fell 7.2%. A glut in oil inventories kept a lid on imports. which only rose 1.8%. Government spending fell 0.85, thanks to a 0.7% cutback in military spending and a 1.5% drop in state and local spending.
- Second - Just like last year, the economy contracted in the first quarter. The BEA revised the growth rate, indicating a 0.7% drop U.S. output. New data came in showing that imports, which subtract from GDP, were higher than originally estimated.
- Third - Turns out the economy only shrank 0.2%. New data showed that exports were higher than originally thought.
2014: 2.4% (Unchanged)
Q4: 2.1% (2.2%)
- Advance - The economy grew 2.6%. This was below estimates, but behind the headline was very positive news. Personal consumption expenditures was up 4.3%, the highest in four year. Business spending rose 7.4%, with gains in every segment except equipment (down 1.9%). Exports rose 2.8%, but were offset by a 8.9% rise in imports, a 4-year high. The biggest drag was a 12.5% drop in military spending. which is to be expected after the 16% gain last quarter.
- Second - The BEA revised its growth estimate down, to 2.2%. Most of the revision came from a revision in business spending, which only rose 5.1%. Consumer spending was revised down to 4.2%.
- Third - Growth estimates remained at 2.2%. Business spending was revised down to 4.7%. This was offset by a revision upwards of consumer spending, to 4.4%. Exports grew 4.5%, but this was more than offset by import growth of 10.4%. Federal government spending fell 7.3%, dragged down by a 12.2% cut in military spending. For more, see Current Retail Sales Statistics .
Q3: 4.3% (5.0% in 2014 estimate)
- Advance - There was a 3.6% increase in economic growth. However, it got a big boost from a 16% increase in defense orders. Exports also helped, rising 11%. This more than outweighed the 1.7% increase in imports (which detract from GDP). Boeing's August orders for commercial aircraft also contributed, sending durable goods up 7.2%. Last but not least, consumer spending on durable goods (mostly automobiles) rose 7.2% as well.
- Second - The BEA revised growth to 3.9%, based on more current data. It showed that businesses didn't cut inventory as much as originally thought, and that personal consumption expenditures and business investment were better.
- Third - The economy actually grew 5.0%, thanks to huge increases in military spending (16%), business equipment (11%), and personal consumption of durable goods, mostly autos (9.2%).
Q2: 4.6% (Unchanged)
- Advance - Most analysts don't believe the astounding 4.0% growth estimate, and expect it to be revised downward in the next two revisions. The BEA based it on a rebound in almost all areas from the severe downturn in the first quarter. The upturns were estimates in inventory investment, exports and imports estimates, based on just two months of actual data. Government and consumer spending was based on three months of data. Fixed investment including housing based on three months of data from the durable goods
report and auto sales.
- Second - The BEA revised the growth rate up to 4.2%. The uptick was due to better data that shows commercial real estate grew a bit more than the original estimate, while inventories did not increase as much.
- Third - Growth was revised up to a whopping 4.6%, based on more complete data that came in during August. These areas include: fixed investment, inventory, exports, and government spending.
Q1: 0.9% (-2.1% in 2014 revision, -2.9% in 2014)
- Advance - Scary-low growth of only .1%. Exports dropped 12%, while business spending fell 6.1%. Most analysts blamed it on severe winter storms.
- Second - The economy actually contracted 1.0%, thanks to a massive downward revision in inventory. That partly makes sense, since stores bought too much inventory for what turned out to be a poor holiday season. However, business investment was down a whopping 11.7%, driven by a 7.5% downturn in commercial real estate, a 5% decline in housing, and a 3.1% drop in equipment. Exports fell 6%, the biggest decline in at least 4 years. The only good news is that personal consumption of services rose 4.3%. Is it the start of a recession (two quarters of economic contraction)? Probably not, but stay tuned.
- Third - More data revealed what many had feared -- GDP fell by a whopping 2.9%, the biggest pull-back in five years. Another contraction like this and we are in a recession. Consumer spending grew just 1%, while residential real estate investment fell 4.2%. Businesses drew down excess inventories, which subtracted 1.7% from growth.
2013: 1.5% (2.2% in 2014 revision, 1.9% in 2013)
Q4: 3.8% (3.5% in 2014, 2.6% in 2013)
- Advance - Healthy growth of 3.1% despite government shutdown . Most of the consumer spending was for automobiles, washing machines and other big-ticket items financed by low-interest rate loans. Spending on these durable goods increased an astounding 5.9% in the fourth quarter. The stock market rose on the positive growth news, especially since the shutdown subtracted .3% growth in October. Another huge drag on growth was housing construction, which was down a whopping 9.8%.
- Second - Growth revised down to 2.4%. Personal consumption grew just 2.6%, instead of the first estimate of 3.3%. This is in keeping with the disappointing retail sales. Most of the decrease was from revised estimates for automobiles, washing machines and other big-ticket items financed by low-interest rate loans. Spending on these durable goods only rose 2.5%, instead of the initial estimate of 5.9% in growth. Housing construction still showed a 8.7% decline.
- Third - Revised up to 2.6% thanks to more complete data, which revealed that personal consumption rose 3.3%, (higher than last month's estimate of 2.6%. Construction remains a drag on growth. Housing construction was down 7.9%, while commercial construction fell 1.8%. That's not just because of cold weather -- last year at this time, homebuilding was up 19.8%, while commercial construction rose 17.6%.
Q3: 3.0% (4.5% in 2014, 4.1% in 2013)
- Advance - 2.8% growth was because businesses stocked up on inventory. Consumer spending only increased 1.5%, the lowest in five years. This makes up 70% of the economy, and represents what families are willing to spend on everyday goods and services. This low rate of growth shows that most people aren't willing to spend a lot. This is confirmed by the slowdown in Halloween sales. and projected softness for the Black Friday holiday shopping season. Most of the growth was from durable goods, like automobiles, furniture and appliances. Government spending rose only .2%, driven mostly by state and local governments. Sequestration slowed federal spending by 1.7%. While some of the cutbacks were in defense, down .7%, most was in non-defense, which fell 3.3%. This all happened before the government shutdown. Exports rose 4.5%, while imports rose just 1.9%.
- Second - The 3.6% growth rate was driven primarily by stores stocking up for the holiday shopping season, adding $16.5 billion, more than in the entire first half of the year. New home construction rose 14.6%. while commercial construction (mostly apartment buildings) increased 12.3%. Business spending on other equipment was actually down 3.7%, signaling low confidence.
- Final - The 4.1% growth rate won't last. The boost was from stores stocking up on inventory for a retail season that disappointed. Consumer spending was sluggish, thanks to poor job growth.
Q2: 1.1% (1.8% in 2014, 2.5% in 2013)
- Advance - Exports and housing drove 1.7% growth.
- Second - Better export data revised growth up to 2.5%.
- Third - Estimate remains at 2.5%. Growth was driven by exports and residential construction, and occurred despite everything that Washington threw at it (sequestration and tax hikes).
Q1: 1.9% (2.7% in 2014, 1.1% in 2013 revision, 1.8% in 2013)
- Advance - A solid 2.5% growth rate. The three major pistons of the economic engine are contributing. First and foremost, housing construction is solidly expanding in response to rising housing prices and demand, something we haven't seen in seven years. Second, consumer spending is still showing confidence. Third is manufacturing, especially from agri-business, as farmers replenished their silos after last year's drought. These three private sector engines overcame the drag from decreased government spending.
- Second - Estimate revised down only slightly to 2.4%.
- Third - The BEA lowered its estimate to a measly 1.8%. Why such a dramatic drop? Additional data about consumer spending showed it was much lower than it originally thought. This makes sense, because cold weather in March dampened retail sales.
More GDP by Year
For earlier years, see U.S. GDP History