 | Real GDP growth in Q2 was revised up a tick to a 1.7% annual rate |
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Implications: The double-dip is dead. Real GDP growth was revised up slightly in Q2, narrowly beating consensus expectations. As we noted last month, were it not for a record-breaking spike in goods imports, real GDP growth would have been very strong in Q2. Real (inflation-adjusted) gross domestic purchases – what we bought, not what we produced – grew at a 5.2% annual rate in Q2, the second fastest pace in the past decade. This should put to bed the idea that domestic demand needs additional government "stimulus," whether from the Fed or through government spending. With nominal GDP growing at a 3.7% annual rate, zero percent interest rates are already stimulative enough.
The "negative" news from today's GDP report was that corporate profits were revised downward. However, profits still increased at a 13% annual rate in Q2 and are up 37% in the past year. So, we do not see the revision as a problem.
In other news this morning, new claims for unemployment insurance fell 16,000 last week to 453,000. The four-week moving average is 458,000, down 30,000 since late August. Continuing claims for regular state benefits declined 83,000 to 4.46 million. The Chicago Purchasing Managers index, a measure of manufacturing, increased to 60.4 in September from 56.7 in August, easily beating the consensus expected decline.
In other recent news, the Case-Shiller index, a measure of home prices in the 20 largest metro areas, slipped 0.1% in July (seasonally-adjusted), a small dip considering the end of the homebuyer tax credit at the end of June. Prices are still up 3.1% versus a year ago.
Click here to view the entire report.
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