Advanced Gross Domestic Product Second Quarter 2018

America’s output grew at a healthy pace from April through June 2018 according to the Bureau of Economic Analysis’ (BEA) report on gross domestic product (GDP).  After accounting for inflation and seasonal adjustments, our economy’s growth accelerated to 4.1 percent on an annualized basis (rising from 2.2 percent in the first quarter), the strongest pace since the third quarter of 2014.  Over the past twelve months, output improved 2.8 percent.   

Consumption, the largest component of GDP, led the acceleration.  Personal consumption expenditures jumped 4.0 percent.  Consumers increased their purchases of durable goods by 9.3 percent!  Nondurable purchases rose an impressive 4.2 percent.  Service consumption also added to the tally, advancing 3.1 percent.  Americans are feeling good about the economy.

Business investment growth was impressive as well.  Firms increased capital outlays by 7.4 percent, led by a surge in structure outlays.  Equipment investments improved 3.9 percent as companies added to their capacity to process information. What’s more, firms spent an additional 8.2 percent on intellectual property rights.  Despite all of this strength, outlays for industrial equipment fell 5.3 percent.  Lastly, residential investment declined 1.1 percent, falling for the fourth time in the past five quarters.

Government outlays added to the headline figure.  Federal spending was up 3.5 percent; national defense spending led this category, rising 5.5 percent.  Even state and local spending got in on the action, improving 1.4 percent.

Trade helped the GDP statistic as well.  Exports turned higher by 9.3 percent.  On the other side of the ledger, imports only increased just 0.5 percent, causing the deficit to fall.  This shrinking shortfall added over one percent to the headline tally.

America’s economy looked strong last quarter.  Improvements were nearly ubiquitous.  Over the next couple of months, more complete data will trickle in and allow the BEA to revise this figure.  In the meantime, most coincident indicators look good, and leading indicators seem mostly favorable as well.  America’s economic expansion marches on.