Highlights
Despite all of the doomsayers, the recovery continued in the second quarter but at a moderate pace. Yes, the recovery is still below par but it's not a double dip so far. Second quarter GDP came in at an annualized 2.4 percent growth, following a revised first quarter gain of 3.7 percent. Today's release includes annual revisions going back three years. The second quarter advance estimate is just barely below analysts' projections for a 2.5 percent increase. But the first quarter upward revision of a full percentage point from the prior estimate of 2.7 percent is a positive surprise.

The latest quarter was led by a rebound in residential investment, a jump in investment in equipment & software, and by inventories. PCEs also posted a moderate gain along with government purchases. The big negative is a worsening in net exports.

Real final sales to domestic purchasers rose 4.1 percent, compared to up 1.3 percent in the first quarter. Final sales of domestic product gained an annualized 1.3 percent in the second quarter, following a 1.1 percent rise the prior quarter. Final sales to domestic purchasers exclude inventory investment but include sales to consumers in the U.S., business fixed investment, residential investment, and government purchases. Final sales of domestic product include final sales to domestic purchasers and add in net exports (GDP less inventory investment).

Year-on-year, real GDP is up 3.2 percent, compared to up 2.4 percent in the first quarter.

Economy-wide inflation accelerated in the second quarter as the GDP price index rose an annualized 1.8 percent, following a 1.0 percent in the first quarter. The market forecast called for a 1.0 percent gain.

The acceleration in prices was due to the impact from net export components and domestic price inflation actually remained subdued. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased a bare 0.1 percent annualized in the second quarter, following a 2.1 percent boost in the first quarter. Softness in the latest period was partially energy related. Excluding food and energy prices, the price index for gross domestic purchases increased 0.9 percent in the second quarter, compared with a rise of 1.6 percent in the previous.

Overall, markets reacted adversely to the headline number for the latest quarter being soft and to the PCE component not being as strong as expected. A second look at the numbers indicates that although Q1 of this year is stronger, most of 2009 is a little less robust that earlier believed. And the recession was more negative.

Market Consensus Before Announcement
GDP growth for the first quarter's third estimate was revised down to an annualized 2.7 pace from the prior estimate of 3.0 percent and an initial estimate of 3.2 percent. The downward revision to GDP growth primarily reflected an upward revision to imports and a downward revision to personal consumption expenditures that were partly offset by upward revisions to exports and to private inventory investment. Looking ahead, traders will not just focus on overall growth but also on final sales. However, a wild card is the annual revisions to GDP and prior quarters' growth could come into play for market reaction.

2010 Release Schedule

Released On: 1/29 2/26 3/26 4/30 5/27 6/25 7/30 8/27 9/30 10/29 11/23 12/22 Released For: Q4a Q4p Q4f Q1a Q1p Q1f Q2a Q2p Q2f Q3a Q3p Q3f   A: Advance P: Preliminary F: Final