Highlights
The recovery lost steam in the second quarter. GDP growth decelerated to 1.5 percent annualized from 2.0 percent in the first quarter. Today's report includes annual revisions and the first quarter was revised up slightly from 1.9 percent. The advance estimate came in higher than the consensus forecast for a 1.2 percent rise.

The component mix showed a slowing in demand. Final sales of domestic product increased an annualized 1.2 percent in the second quarter after a 2.4 percent rise in the first quarter. Final sales to domestic purchasers (excludes net exports) gained 1.5 percent, following a 2.2 percent advance in the prior quarter. First quarter final sales numbers were revised up moderately.

Deceleration in the second quarter came largely in consumer spending with PCEs posting at 1.5 percent in the second quarter versus 2.4 percent the prior quarter. Also slowing were nonresidential structures to up 0.9 percent from up 12.9 percent and residential structures to up 9.7 percent from up 20.5 percent. Imports worsened to up 6.0 percent from up 3.1 percent.

Improvement was seen in business equipment, up 7.2 percent versus up 5.4 percent in Q1; inventory investment rose moderately; and exports gained 5.3 percent compared to 4.4 percent.

Economy-wide inflation rose an annualized 1.6 percent, compared to 2.0 percent in the first quarter, according to the GDP price index. The consensus called for a 1.6 percent boost for the latest number.

On the news, equity futures rose slightly. The only notable good news is that growth was a little higher than expected. The second quarter growth rate is too low to bring down unemployment. The big question is whether the latest report motivates the Fed to loosen monetary policy. There was no indication of deflation. And growth was not atrocious though certainly anemic. There will be a lively debate at the July 31-August 1 FOMC but any policy change likely will be tweaking rather than a major initiative.

Market Consensus before announcement
Special Note: This report will include annual revisions going back several years. So there is market risk for upside and downside revisions to GDP history.

GDP for the third estimate for the first quarter showed the economy growing at the same sluggish pace as previously believed. First quarter GDP growth posted a still slow 1.9 percent annualized pace, compared to the prior estimate of 1.9 percent and the fourth quarter pace of 3.0 percent, annualized. There were modest component revisions. Upward revisions were seen in nonresidential fixed investment, residential investment, and net exports. Downward revisions also were seen in personal consumption and inventory investment. Final sales of domestic product were revised up slightly to 1.8 percent, compared to the prior estimate of 1.7 percent and 1.1 percent for the fourth quarter. Final sales to domestic purchasers (excludes net exports) were revised down slightly to 1.6 percent, compared to the prior estimate of 1.7 percent and 1.3 percent for the fourth quarter. Economy-wide inflation according to the GDP price index was revised to 2.0 percent from the prior estimate for the first quarter of 1.7 percent and followed 0.9 percent for the fourth quarter.

2012 Release Schedule

Released On: 1/27 2/29 3/29 4/27 5/31 6/28 7/27 8/29 9/27 10/26 11/29 12/20 Release For: Q4a: Q4p: Q4f: Q1a: Q1p: Q1f: Q2a: Q2p: Q2f: Q3a: Q3p: Q3f:   A: Advance P: Preliminary F: Final