Last month, the Bureau of Economic Analysis estimated that the U.S. economy grew 1.3 percent in the second quarter of this year, while also downgrading first quarter growth to 0.4 percent. The bigger news with that announcement was the steep decline in the growth rates for the first quarter, as earlier estimates had pegged real GDP being up 1.9 percent.
Given the paltry growth of the first half of this year, I was not shocked to learn earlier today that the second quarter growth numbers have been revised down. The BEA now estimates that real GDP rose just 1 percent in the second quarter. The newer figure is the result of downward revisions to inventories and exports; however, there were also upward revisions to consumer spending and business fixed investment.
As much as anything, these numbers reflect weaknesses in the manufacturing sector, with supply chain disruptions and other issues challenging the industry. Manufacturers had contributed 1.9 percent and 1.2 percent of the growth in real GDP in the last quarter of 2010 and first quarter of 2011, making them one of the strongest components in the economy.
However, this changed in the second quarter of 2011, with durable goods consumption dragging growth down by 0.4 percent and nondurable goods spending having a minor positive contribution of 0.07 percent. The export of goods added 0.26 percent to growth, as well.
So far, third quarter growth has been mixed at best, suggesting continued economic weaknesses at least in the short term. I am now estimating that real GDP will grow 1.4 percent in 2011, assuming that production and spending pick up slightly by the later months of this year. Nonetheless, such growth is not enough to help employment or possibly to lift consumer and business sentiment.
Chad Moutray is chief economist, National Association of Manufacturers.