"Other aspects of the economy, including exports, investment in structures and investment in equipment and software expanded robustly during the second quarter." —ABC Chief Economist Anirban Basu.
While the nation’s economy is still showing signs of weakness, nonresidential fixed investment increased 6.3 percent in the second quarter of this year following a revised 2.1 percent increase in the first quarter, according to the July 29 Gross Domestic Product (GDP) report by the U.S. Commerce Department. Nonresidential fixed investment in structures jumped 8.1 percent in the second quarter following a 14.3 percent drop in the previous quarter. Fixed investment in equipment and software rose 5.7 percent in the second quarter following an 8.7 percent gain in the first quarter.
Residential fixed investment grew 3.8 percent in the second quarter after a 2.4 percent loss in the first quarter. Exports grew 6 percent in the second quarter as exports of goods were up 6.8 percent and exports of services increased by 4 percent. Imports were up 1.3 percent for the second quarter as imports of goods increased by 1.5 percent and imports of services inched up 0.2 percent.
Personal consumption expenditures edged up 0.1 percent in the second quarter as expenditures of services were up 0.8 percent and expenditures in goods slipped 1.3 percent. Changes in real private inventories added 0.2 percent to the second-quarter. Private businesses increased inventories by $49.6 billion for the quarter. Real final sales of domestic product – GDP less change in private inventories – increased 1.1 percent for the quarter following no change in the first quarter.
Federal government spending increased by 2.2 percent in the second quarter as national defense spending rose by 7.3 percent and nondefense spending decreased by 7.3 percent. State and local governments decreased spending for the fourth consecutive quarter, falling by 3.4 percent in the second quarter.
Gross domestic purchases – purchases by U.S. residents of goods and services wherever produced – increased 0.7 percent in the second quarter following a 0.7 percent increase in the first quarter. Overall, real gross domestic product (GDP) increased 1.3 percent in the second quarter following a revised 0.4 percent increase in the first quarter.
Analysis
“Despite the fact that the headlines for today’s GDP report seem awful, there is actually a significant amount of decent news buried in the data,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Much of the slowdown in economic growth is due to a deceleration in consumer spending, but other aspects of the economy, including exports, investment in structures and investment in equipment and software expanded robustly during the second quarter.
“Consumption slowed largely because of higher food and energy prices. The question was whether businesses would follow the path laid down by consumers or continue to remain in expansion mode. The answer is that businesses continued to position themselves for growth opportunities,” Basu said.
“Sadly, corporate momentum and confidence may not last,” said Basu. “Given the ongoing shakiness among consumers in light of high and rising unemployment, and lingering uncertainty in Washington, inventory investment is unlikely to pick up significantly in the near-term. That will lead to weakness in orders and production.
“Likewise, economic activity during the second half of 2011 is positioned to be weaker than it would have been but for the ongoing stalemate in Washington, D.C. This will likely translate into less robust business investment, including in structures,” Basu said. “The bottom line is that the recovery in nonresidential construction has been further postponed.”
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