Second Quarter Real GDP Increased at a 2.3% Annual Rate, Q1 Revised Up
- Real Gross Domestic Product for 2015Q2 increased at a 2.3 percent annual rate.
- First quarter real GDP growth was revised up from -0.2 to +0.6 percent.
- Initial Claims for Unemployment Insurance gained 12,000 to hit 267,000 for the week ending July 25.
The Bureau of Economic Analysis released their first estimate of second quarter 2015 real GDP, which, they said, increased at a moderate 2.3 percent annual rate. Included in the GDP data release was the annual revision of the national income and product accounts. This is essentially the fourth estimate of first quarter GDP. The annual revisions tended to dampen the recent historical pattern of weak first quarter GDP, meaning a little less weak. It also dampened the recent pattern of strong GDP in the second half of the year. On an annual basis, 2013 now looks a little weaker as a whole, with real GDP increasing at a 1.5 percent annual rate, where previously the estimate was 2.2 percent. For 2014 the stronger early quarter numbers and the weaker later quarter numbers left the annual growth rate unchanged at 2.4 percent. Today’s GDP data does not significantly change our outlook for the second half of 2015. We still expect to see moderate real GDP growth of about 2.5 to three percent for the last two quarters of the year. While the GDP revisions are fascinating to us data geeks, for normal humans they also have some implications. The slightly stronger first quarter real GDP growth, plus the confirmation of an acceleration in growth through the second quarter adds support to our view that the Federal Reserve will likely announce a small increase to the fed funds rate at the conclusion of the September 16-17 FOMC meeting. The interest rate move still remains highly data dependent. We expect to see reasonably strong job growth in July and August, above 200,000 per month, and a decrease in the unemployment rate to 5.2 percent by August. If U.S. data turn south over the next seven weeks, or if a major international event stresses global financial markets, then the Fed could delay interest rate lift-off until December or later.
Supporting our call for ongoing moderate-to-strong job growth through July and August, today’s release of initial unemployment insurance claims for the week ending July 25 shows an inconsequential gain of 12,000 to hit a level of 267,000. Anything below 300,000 is considered a very good number for the level of initial weekly claims and we have been cruising comfortably under 300,000 for most of this year. Continuing claims increased by 46,000 for the week ending July 18, also still a very good number.
Market Reaction: Equity markets opened with losses. The 10-year Treasury bond yield is down to 2.28 percent. NYMEX crude oil is up to $49.12/barrel. Natural gas futures are down to $2.81/mmbtu.
For a PDF version of this Comerica Economic Alert click here: GDP 07-30-15.