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In its second estimate the Bureau of Economic Analysis revised up its initial estimate of second quarter real GDP growth from 1.5% to 1.7%. Despite the upward revision, GDP growth slowed in the second quarter from 2.0% growth in the first quarter. GDP growth in the second quarter remains the slowest pace seen since the third quarter of last year.



The primary difference between the first and second estimate was a boost in consumption seen in the second estimate. Consumption contributed 1.20% to growth in the second quarter after contributing only 1.05% in the initial estimate. Fixed investment and inventories contributed slightly less to the second estimate than was seen in the first.



The slowing from the first quarter to the second was primarily a result of a slowing in durable goods consumption and construction growth. Consumer spending on durable goods was particularly strong in the first quarter.

Read the BEA release.

GDP growth in the first quarter was revised down to 1.9% in the BEA’s second estimate. This growth represents a slowdown from the 3.0% pace set in the fourth quarter of 2011, but is significantly better than the 0.4% growth in the first quarter of last year.



The revisions to the forecast were primarily due to increased drags from government spending and net exports. Government expenditures proved a 0.8% drag, more than the 0.6% initially reported. Net exports drag slowed growth by about 0.1%. Personal consumption reduced its contribution to growth as well, adding 1.9%, down from 2.0% in the first estimate.

Fixed investment improved in the second estimate, contributing 0.6% to growth, up from the 0.2%.

Consumer delinquencies declined significantly in last year’s fourth quarter, with bank card delinquencies falling to levels not seen since the third quarter of 1994, according to results from the ABAs Consumer Credit Delinquency Bulletin.



The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 17 basis points to 1.99 percent of all accounts in the fourth quarter, below the 15-year average of 2.39 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

James Chessen, ABA’s chief economist, attributed the improvement to consumers’ continued efforts build a financial buffer against economic uncertainty.

“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” Chessen said. “While this conservative approach to credit may slow economic growth in the short-term, it portends stronger, more consistent growth in the future. The sharp decline in delinquencies reinforces the notion that the economic recovery has become more self-sustaining and is on a path to increased growth.”

While Chessen found the continued decline encouraging, he cautioned that future challenges could make it difficult for some consumers to meet their financial obligations.

“Make no mistake about it, a great deal of uncertainty still lingers over this economy,” Chessen said. “Furloughs from sequestration, falling disposable income and increased healthcare and regulatory costs for businesses could lead to challenges in the year ahead.”

Read ABAs full release.

The second estimate of third quarter GDP indicates that the economy expanded at 2.0% during the quarter, down from an initial estimate of 2.5%, according to a Bureau of Economic Analysis report released this morning. Over the past year the economy has expanded just 1.5%, well below levels needed for a self sustaining recovery.


The second estimate of third quarter growth was 0.5%, or $15 billion, lower than the initial estimate. The decline is due primarily to a large downward revision to private inventory investment and smaller downward revisions to nonresidential fixed investment and personal consumption expenditures. These drags on GDP were partially offset by a downward revision to imports.

Despite the downward revision, third quarter GDP showed improvement from the second quarter’s 1.3% growth. The acceleration in growth reflects stronger growth in consumer spending, business investment, and exports as well as a smaller drag from state and local government. A large drop in inventory investment was the primary drag on growth in the third quarter.

Corporate profits rose at 2.1% (not annualized) in the third quarter, slower than the 3.3% growth seen in the second quarter. Despite the slower rise, profits are up almost 8% over the previous year.


Read the report.

Fourth quarter growth accelerated to 3%, up from 1.8% in the third quarter according to the BEA’s second estimate released this morning. The initial estimate reported fourth quarter GDP growth of 2.8%. For all of 2011 the economy grew at 1.6%, led by investment and exports. During this time, government spending contracted


Fourth quarter growth acceleration was led primarily by a large shift in inventories, which changed from dragging 1.35% on growth, to aiding growth by 1.88%. This amounted to about two thirds of growth over the quarter.


The revision from the initial estimate was led primarily by faster growth in fixed investment and lower imports. Consumer and government spending both saw minor upward revisions as well. Exports and inventory accumulation saw revisions that dragged on growth slightly.

Looking forward, the accumulation of inventories at the end of 2011 does not bode well for growth in early 2012. Furthermore, trade had begun to drag on growth in the fourth quarter and is likely to continue to do so as headwinds from Europe persist.

Read the report.