Here’s a breakdown of the percent changes in the components of real GDP for the second quarter (from Table 1 of today’s BEA report):
1. Personal consumption expenditures (PCE): 2.0% in QII, matching the growth rate of personal consumption spending in third quarter of 2009, and the highest growth rate in PCE since the 2.4% rate in the first quarter of 2007. The 2% growth in PCE follows increases over the previous three quarters of 2.0%, 0.9% and 1.9%, which marks the first period of four consecutive quarterly increases since 2007 (QI to QIV), and follows straight quarterly decreases from QIII 2008 to QII 2009.
2. Gross Private Domestic Investment: 25.0% in QII, which was the fourth consecutive quarterly increase in investment, following double-digit increases of 29.1% in the first quarter, 26.7% in QIV 2009, and 11.8% in QIII 2009. The four consecutive quarterly increases over the last year follows eight consecutive quarterly decreases from QIII 2007 to QII 2009. The average quarterly growth in investment spending of 23.15% over the last four quarters is the highest annual average since 1987.
3. Exports: 9.1% in QII, following increase of 11.4% (Q1 2010), 24.4% (QIV 2009) and 12.2% (QIII 2009), for an average growth rate over the last year of 14.3%, which is the highest annual average sine 1996. The positive increases in exports over the last four quarters follows four quarters of negative growth from QIII 2008 to QII 2009.
4. Imports: 32.4% in QII, the highest quarterly growth in imports since 1975, and the fourth consecutive quarterly increase (11.2% in Q1, and 4.9% and 21.9% in QIV and QIII 2009) following four straight quarterly decreases. The average quarterly increase of the last year of 17.6% is the highest since 1984.
Bottom Line: Except for the fact that we subtract imports from exports to calculate GDP, the growth rates above in private sector activity (consumption, investments, and international trade) in the second quarter of this year, and over the last four quarters, suggest that the economy may be in better shape than indicated by the 1.6% growth in real GDP.