Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Why Investors Care
| Released on 9/27/07 For Q2 Final 2007 | |||||||||||||||||||||||||
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Highlights
The latest GDP numbers changed little from the prior estimates. For the second revisions to second quarter GDP, real GDP was revised down to an annualized 3.8 percent from the previous estimate of 4.0 percent. The latest revision matched expectations. The second quarter pace followed a nearly flat 0.6 percent annualized increase in the first quarter. The second quarter GDP price index was revised down marginally to 2.6 percent from the prior estimate of 2.7 percent. The market had expected a 2.7 percent figure for this broad price index. The core PCE price index was revised up slightly to 1.4 percent from the prior estimate of 1.3 percent but was still lower than the first quarter's 2.4 percent.
The downward revision to GDP was primarily due to a downward revision to net exports.
Today's report continues to show that the economy was quite robust heading into the third quarter financial turbulence, helping the economy to move past those difficulties. The big news today, however, is the sharp drop in jobless claims which are more likely to move the markets, notably nudging up interest rates.
GDP in the first revision to second quarter data was revised up to an annualized 4.0 percent from the initial estimate of 3.4 percent. The second quarter GDP price index was left unchanged from the initial estimate of 2.7 percent while the core PCE price index was revised to an annualized 1.3 from the initial estimate of 1.4 percent. With the recent disarray in the financial markets and recent and generally softer monthly data, the second quarter GDP numbers are looking like ancient history. But the final numbers do still give us important information on how strong the economy was as it headed into the more turbulent third quarter.
Real GDP Consensus Forecast final Q2 07: +3.8 percent annual rate
Range: +3.6 to +4.0 percent annual rate
GDP price index Consensus Forecast for final Q2 07: +2.7 percent annual rate
Range: +2.7 to +2.7 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. |
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It is common to compare quarterly changes at annual rates in the GDP deflator. 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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