America is growing again

The US economy returned to growth in the second quarter.

The first estimate of second-quarter gross domestic product came in at 2.3% on an annualized basis, slightly below the 2.5% that had been forecast.

Thursday’s report, however, showed the economy didn’t actually shrink in the first quarter as initially reported.

First-quarter GDP growth was revised up to 0.6% from a contraction of 0.2%.

And so while Thursday’s headline number was lower than expected, we got confirmation that America has returned to growth.

Consumer spending, which makes up about two-thirds of GDP, boosted growth in the quarter. Real personal consumption grew more than expected, at 2.9%, versus the estimate for 2.7%, and compared with 2.1% prior.

Core personal consumption expenditures (PCE) grew 1.8%, versus 1.6% expected quarter-on-quarter.

Exports rebounded to gain 5.3% in the quarter, after a 6% decline in the prior period induced by the West Coast ports slowdown, and in spite of the strong dollar.

For the first time, the Bureau of Economic Analysis also released an average of GDP and gross domestic income to account for the statistical discrepancy that makes both different. For Q1, this composite came in at 0.5% in inflation-adjusted terms. The Q2 average will be released with the second estimate of GDP next month.

The BEA also released revisions to GDP going back to the fourth quarter of 2011. Most of these were revised lower, with prints for six quarters lowered and four raised.

In a note to clients, BNP Paribas economists wrote: “Today’s GDP report, including its revisions, will give the FOMC more confidence that the soft patch in Q1 was less significant than previously thought. The story on the economy remains consistent: strong consumption, weak investment. We are looking for this trend to continue in the second half of the year, where we anticipate growth accelerating above 3.0%.”

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