Sunday, August 8, 2010

GDP grows by only 2.4 percent

The US gross domestic product grew by 2.4% in the second quarter of 2010 as reported by the commerce department's Bureau of Economic Analysis. The 2.4% is the quarterly difference between the seasonally adjusted 1st quarter and 2nd quarter output of goods and services scaled to an annual rate (ie, the quarter change was really 0.59% times 4 = 2.36%). The estimate is an advanced estimate which is subject to revision as more data comes in.

There was broad increase in many of the components of GDP that contributed positively to growth. Exports, fixed investment, personal consumption expenditures, inventories, federal government spending, and residential fixed investment. Imports increased by 35% depressing GDP by nearly 4%. The slow down in GDP was due to slower inventory build-up and increased imports.

When you look at the individual components of GDP you can see the huge effect of imports on GDP. However, across the board the growth in investments, consumption spending and inventories boosted GDP. The addiction to imports is holding back the economy.

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