CERF Blog
Once a year, the U.S. Bureau of Economic Analysis (BEA) releases a new set of economic growth estimates that include not yet released numbers for the second quarter and revisions to historical GDP estimates as far five years back. Today is that day.
The first estimate of 2015’s second quarter economic growth is 2.3 percent, down a bit from the consensus forecast of 2.5 percent, and up from our forecast of 1.7 percent. The previous estimate of the 2015 first quarter’s contraction of 0.2 percent is now revised up to an expansion of 0.6 percent. Given there is some path dependence in our model of the economy, our forecast would have been a bit higher if it had the benefit of seeing the revised quarter one data.
GDP growth rate revisions for the period from 2011 to 2014 were negative. In previously published estimates, average annual economic growth was 2.3 percent; revisions put this statistic at 2.0 percent. This result was driven by downward revisions to 2012 and 2013 growth, 2014 was unrevised. It may yet be revised in future years.
While overall 2014 growth was unrevised, the growth rates within the year were revised, importantly, the second half of 2014 economic growth was revised down. Third quarter was revised down from 0.7 percentage point and fourth quarter was revised down 0.1 percentage point.
The new estimates imply that in the current expansion from the second quarter of 2009 through the first quarter of 2015, the average growth rate of 2.1 percent is 0.1 percent less than previously published estimates and compares with an average growth rate of 3.5 percent from 1947 quarter 2 to 2007 quarter 4.
The improvement in growth from the first quarter to the second quarter was mainly due to improvements in consumption and trade. The first quarter had a sizable negative export shock that was almost completely reversed in the second quarter. Consumption growth improved from 1.8 percent in the first quarter to 2.9 percent in the second, amounting to about 87 percent of the contribution to GDP. This was driven by strong durables consumption growth, where second quarter expenditures on motor vehicles and parts was 10.4 percent.
Overall, this release indicates a moderately expanding economy that is congruent with weak World growth, a relatively slow U.S. labor market, elevated debt levels, and historically low per capita housing starts.
Given this, and given that inflation remains relatively low, I do not see the Fed raising rates in September.