US GDP grows at 4% in Q2, 2014  

1082014

PHD Research Bureau

To sunitag@phdcci.in

Jul 31 at 4:17 PM

US GDP grows at 4% in Q2, 2014

Federal Reserve announces further tapering of Asset Purchase Program byanother US $10 billion

The United States GDP advanced 4% in the second quarter of 2014, rebounding from a revised 2.1% contraction in the previous period. Upturns in private inventory investment and exports and an acceleration in personal consumption and investment contributed to better than expected results.

Federal Open Market Committee (FOMC) has announced further tapering of its monthly asset purchases by US $10 billion from US $35 billion to US $25 billion on account of surged economic growth in the second quarter. Beginning August, the FOMC will add to its holdings of agency mortgage-backed securities at a pace of US $10 billion per month rather than US $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of US $15 billion per month rather than US $20 billion per month. 

According to the advance estimate of Bureau of Economic Analysis, Department of Commerce US, the real GDP in US increased at an annual rate of 4% in Q2 of 2014 as compared to 2.1% decline in Q1 of 2014. This upturn in the percentage change in US real GDP primarily reflected increased personal consumption expenditures, private inventory investment, exports, non residential fixed investment, state and local government spending, and residential fixed investment in the country.

Real personal consumption expenditures increased 2.5% in the second quarter, compared with an increase of 1.2% in the first. Durable goods increased 14%, compared with an increase of 3.2%. Nondurable goods increased 2.5%; it was unchanged in the first quarter. Services increased 0.7% in the second quarter, compared with an increase of 1.3% in the first.

Real nonresidential fixed investment increased 5.5% in the second quarter, compared with an increase of 1.6% in the first. Investment in nonresidential structures increased 5.3%, compared with an increase of 2.9%. Investment in equipment increased 7%, in contrast to a decrease of 1%. Investment in intellectual property products increased 3.5%, compared with an increase of 4.6%. Real residential fixed investment increased 7.5%, in contrast to a decrease of 5.3%.

Real exports of goods and services increased 9.5% in the second quarter, in contrast to a decrease of 9.2% in the first. Real imports of goods and services increased 11.7%, compared with an increase of 2.2%.

Real federal government consumption expenditure and gross investment decreased 0.8% in the second quarter, compared with a decrease of 0.1% in the first. National defense increased 1.1%, in contrast to a decrease of 4%. Nondefense decreased 3.7%, in contrast to an increase of 6.6%. Real state and local government consumption expenditures and gross investment increased 3.1%, in contrast to a decrease of 1.3%.

Warm regards,

Dr. S P Sharma

Chief Economist