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2Q09 Advanced GDP Better Than Estimates on Government Expenditures

Written by

MikeMcD82

The 2Q09 advanced GDP estimate came in at an annual rate of -1.0%, or better than analysts most recent estimates.  This reading is much improved compared to last quarter’s -6.5% reading.  However, looking behind the headline, a big jump in government expenditures offset what was a substantial decline in personal consumption, which contributed -0.9% to this quarter’s advanced GDP estimate.  Weakness in the labor market is most likely the leading factor behind the decline in consumer spending. Therefore, the US economy is likely to continue improving, but at a moderate pace, until we see a significant recovery in the employment situation.  Initial claims data, which is a good forward looking indicator for payrolls, has begun to improve, but remains at levels indicative of continued weakness for the unemployment rate.

Contributions to the Change in 2Q09 GDP:

GDP -1.0
Personal Consumption Expenditure -0.9
Gross Private Domestic Investment -2.6
Net Exports of Goods & Services 1.4
Government Consumption & Expenditures 1.1

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