Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 9/26/08 For Q2 Final 2008 | |||||||||||||||||||||||||
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Highlights
Second quarter GDP surprisingly was revised down significantly. But the number will still look quite good compared to the likely figures in coming quarters. The Commerce Department's second revision to second quarter GDP was revised down to 2.8 percent from the prior estimate of 3.3 percent. The revised estimate for second quarter GDP fell short of the market forecast for an unrevised 3.3 percent increase. On the inflation front, the GDP price index was revised to an annualized 1.1 percent - compared to the previous estimate of 1.2 percent. The market forecasted no revision. Headline PCE inflation was revised to 4.3 percent - up slightly from the prior estimate of 4.2 percent. Core PCE inflation came in at 2.2 percent, compared to the earlier estimate of 2.1 percent for the second quarter.
The lower estimate for second quarter GDP was largely due to lower figures for personal consumption and in exports.
Year-on-year growth for real GDP was revised down to 2.1 percent from the prior second quarter estimate of 2.2 percent. This is down from 2.5 percent in the first quarter.
GDP growth for the second quarter was revised up sharply to 3.3 percent from the initial 1.9 percent. The upward revision was primarily due to upward revisions to exports and durables consumption. The second quarter jump followed a modest 0.9 percent increase the prior quarter. On the inflation front, the GDP price index was revised to an annualized 1.2 percent - up from the initial estimate of 1.1 percent. The sharp easing in overall price index was technical in nature, caused by a spike in nominal imports cutting into nominal GDP growth. In contrast, the inflation for final sales of domestic purchases was revised up to a strong 4.3 percent, compared to the initial estimate of 4.2 percent Headline PCE inflation was unrevised at 4.2 percent and up from 3.6 percent in the first quarter. Core PCE inflation also was unchanged--coming at 2.1 percent from 2.3 percent in the first quarter.
Real GDP Consensus Forecast for final Q2 08: +3.3 percent annual rate
Range: +2.9 to +3.5 percent annual rate
GDP price index Consensus Forecast for final Q2 08: +1.2 percent annual rate
Range: +1.2 to +1.3 percent annual rate
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Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable. |
![[Chart]](chart_1.gif)
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It is common to compare quarterly changes at annual rates in the GDP price index. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes. |
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