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Pace of GDP Declines in Second Quarter

A newly released Commerce Department Report showed gross domestic product, GDP, slowed 1% in the second quarter vs. 6.4% in the first three months of the year. Economists and analysts say that’s an encouraging sign that the recession might be coming to an end.

The decrease in real GDP in the second quarter primarily reflected negative contributions from nonresidential fixed investment, personal consumption expenditures, PCE, residential fixed investment, private inventory investment, and exports that were partly offset by positive contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

The much smaller decrease in real GDP in the second quarter than in the first primarily reflected much smaller decreases in nonresidential fixed investment, in exports, and in private inventory investment, upturns in federal government spending and in state and local government spending, and a smaller decrease in residential fixed investment that were partly offset by a much smaller decrease in imports and a downturn in PCE.

Motor vehicle output added 0.20 percentage points to the second-quarter change in real GDP after subtracting 1.69 percentage points from the first-quarter change. Final sales of computers subtracted 0.04 percentage points from the second-quarter change in real GDP after adding 0.06 percentage points to the first-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.7% in the second quarter, in contrast to a decrease of 1.4% in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 1.1% in the second quarter, compared with an increase of 0.2% in the first. Real personal consumption expenditures decreased 1.2% in the second quarter, in contrast to an increase of 0.6% in the first. Durable goods decreased 7.1%, in contrast to an increase of 3.9%. Nondurable goods decreased 2.5%, in contrast to an increase of 1.9%. Services increased 0.1%, in contrast to a decrease of 0.3%.

Real nonresidential fixed investment decreased 8.9% in the second quarter, compared with a decrease of 39.2% in the first. Nonresidential structures decreased 8.9%, compared with a decrease of 43.6%. Equipment and software decreased 9%, compared with a decrease of 36.4%. Real residential fixed investment decreased 29.3%, compared with a decrease of 38.2%.

The complete second quarter GDP report is available from the Bureau of Economic Analysis.

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