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US GDP - revisions imply lower productivity growth

31 July 2015
Fed, GDP, The, US

US real GDP bounced back to a solid +2.3% annual pace in the second quarter of the year, proving that March quarter weakness was largely temporary.    The best part of the result was the +2.9% increase in consumer spending but private sector investment was less exuberant at +0.8%.
Percent change

Source: US BEA and AMP Capital

This release was also interesting in that it incorporated annual benchmark revisions back to 2012.  Of particular note was the upward revision in March quarter growth from an annualised -0.2% to +0.6%.  However on average the revisions knocked 0.2% off annual growth over the period of the revisions.

With respect to the comments I made yesterday about underwhelming productivity, these GDP revisions make the mystery a bit deeper by lowering implied productivity growth.  Any immediate concerns about that for the Fed will be ameliorated by the still subdued annual 1.3% increase in the core personal consumption expenditure deflator, but it does reinforce that the time for the Fed to start the interest rate normalisation process is nigh.

This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.

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