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Gold Index
Second Quarter GDP Looking Better
The component contributions for first quarter real GDP were very much in-line with our forecasts, as shown in the table below.
| % of GDP | Change | GDP Cont. Forecast | GDP Cont. Actual |
|
|---|---|---|---|---|
| Personal Consumption | 71% | +0.8% | +0.6% | +0.7% |
| Net Exports | -4% | +0.3% | +0.2% | |
| Business Investment -- Structures | 3% | -7% | -0.2% | -0.2% |
| Business Investment -- Equipment, Software | 9% | -1% | -0.1% | -0.1% |
| Residential (housing) | 4% | -24% | -0.9% | -1.2% |
| Government | 18% | +1.5% | +0.3% | +0.4% |
| Inventories | n/a | +0.7% | +0.8% | |
| Total | +0.7% | +0.6% |
The component trends suggest that the key sectors of the economy are on track to produce real GDP growth near 2% in the second quarter.
Specifically, real personal consumption expenditures (consumer spending) is trending slightly higher, exports continue to boom, and business investment in equipment and software is holding up very well.
Even without the fiscal stimulus that is already underway, this would produce real GDP growth in the second quarter of about 1%. With the fiscal stimulus adding to consumer spending, real GDP growth will be near 2%, and perhaps higher.
Sentiment is quickly shifting, as we suggested it would in the April 28 Big Picture column. Talk that the worst of the Wall Street credit crisis is behind us is now building. Even pessimist Warren Buffet said that this weekend. There is an increased focus on how strong the economic recovery will be in the quarters ahead.
The gloom and doom is lifting. No one is suggesting the outlook is bright and sunny; but it is now only partly cloudy with a reduced risk of severe storms.
Briefing.com's economic and interest rate outlook:
| '07 Q2 | Q3 | Q4 | '08 Q1 | Q2 est | |
|---|---|---|---|---|---|
| Real GDP | 3.8 | 4.9 | 0.6 | 0.6 | 2.0 |
| GDP Price Index | 2.6 | 1.0 | 2.4 | 2.6 | 2.8 |
| Consumer Spending | 1.4 | 2.8 | 2.3 | 1.0 | 3.4 |
| Business Investment | 11.0 | 9.3 | 6.0 | -2.5 | -2.5 |
| Unemployment Rate | 4.5 | 4.7 | 4.8 | 4.9 | 5.2 |
| Fed policy target (avg) | 5.3 | 5.1 | 4.5 | 3.2 | 2.1 |
| 10-yr Tsy Yld (avg) | 4.9 | 4.7 | 4.3 | 3.6 | 3.9 |
Feeds!