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Friday, October 15, 2010

US Gross Domestic Product, Second Quarter 2010

Date: September 30, 2010

US Gross Domestic Product, Second Quarter 2010

Source: United States Bureau of Economic Analysis

Link to Release: http://www.bea.gov/newsreleases/national/gdp/2010/pdf/gdp2q10_3rd.pdf

Summary: US Real Gross Domestic Product grew at an annualized rate of 1.7 per cent in the second quarter of 2010, down from an annualized rate of 3.7 per cent reported during the first three months of the year. This deceleration in growth was driven mostly by a decline in private (i.e. businesses’) inventory investment and a sharp increase in imports, which offset the consumption of domestically produced goods and services. The output declines in the above category partially offset increased government spending and an upturn in fixed investments by businesses (i.e. capital investments other than inventory).

Analysis: While the second quarter growth rate was considerably lower than what was reported for the first three months of 2010, the result masked some good news from both the consumer and business sectors in the US. Personal consumption, fixed business investment ( i.e. capital investments other than inventory) and fixed residential construction (i.e. new home construction and related) all increased at greater rates than reported for the first quarter. The fact that more than one sector of the economy is driving growth helps to allay fears of a double-dip recession. However, an annualized increase of less than two per cent points to a more prolonged recovery period than was initially predicted. Slower growth in the US was one contributing factor to slower growth in the Canadian economy in the second quarter as well as the month of July. The Bank of Canada has pointed to growth in the US economy as an important factor that will feed into decisions regarding their policy interest rate.



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