Slower GDP Lower Market

123jump.com Staff
30 Nov, -0001
New York City

Investments by businesses in equipment, government spending and rising exports was outweighed the inventory liquidation by businesses. The pace of business investment is likely pick up in the third quarter. Wendy

U.S. MARKET AVERAGES

The economic growth in the second quarter declined in the second quarter as businesses liquidated inventories. However, large part of the economic growth has to do with the residential construction and government spending.

At mid-day averages are trading lower after a flood of earnings and lower read on GDP.

Archer Daniel Midlands, Anadarko, American Electric Power reported better-than-anticipated earnings. Chevron reported decline in earnings. Oil in New York is trading above $60 per barrel.

Home builders, restaurants, tech and Internet are bouncing-off from the intra-day lows.

ECONOMIC NEWS

Latest read on 2Q GDP

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.4 percent in the second quarter of 2005, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.8 percent.

The major contributors to the increase in real GDP in the second quarter were personal consumption expenditures, exports, equipment and software, residential fixed investment, and
government spending. The contribution of these components were partly offset by a negative
contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The deceleration in real GDP growth in the second quarter primarily reflected a downturn in
private inventory investment that was partly offset by a downturn in imports and accelerations in exports and in equipment and software.

Final sales of computers contributed 0.43 percentage point to the second-quarter change in real GDP after contributing 0.37 percentage point to the first-quarter change. Motor vehicle output subtracted 0.08 percentage point from the second-quarter change in real GDP after contributing 0.15 percentage point to the first-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 3.2 percent in the second quarter, compared with an increase of 2.9 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 2.0 percent in the second quarter, compared with an increase of 3.0 percent in the first.

Real personal consumption expenditures increased 3.3 percent in the second quarter, compared with an increase of 3.5 percent in the first. Durable goods purchases increased 8.3 percent, compared with an increase of 2.6 percent. Nondurable goods purchases increased 3.3 percent, compared with an increase of 5.3 percent. Services expenditures increased 2.3 percent, compared with an increase of 2.8 percent.

Real nonresidential fixed investment increased 9.0 percent in the second quarter, compared with an increase of 5.7 percent in the first. Nonresidential structures increased 3.1 percent, in contrast to a decrease of 2.0 percent. Equipment and software increased 11.0 percent, compared with an increase of 8.3 percent. Real residential fixed investment increased 9.8 percent, compared with an increase of 9.5 percent.

Real exports of goods and services increased 12.6 percent in the second quarter, compared with an increase of 7.5 percent in the first. Real imports of goods and services decreased 2.0 percent, in contrast to an increase of 7.4 percent.

Real federal government consumption expenditures and gross investment increased 1.3 percent in the second quarter, compared with an increase of 2.4 percent in the first. National defense increased 2.0 percent, compared with an increase of 3.0 percent. Nondefense decreased 0.1 percent, in contrast to an increase of 1.1 percent. Real state and local government consumption expenditures and gross investment increased 2.4 percent, compared with an increase of 1.6 percent.

The real change in private inventories subtracted 2.32 percentage points from the second-quarter change in real GDP after adding 0.29 percentage point to the first-quarter change. Private businesses reduced inventories $6.4 billion in the second quarter, following increases of $58.2 billion in the first quarter and $50.1 billion in the fourth.

Real final sales of domestic product -- GDP less change in private inventories -- increased 5.8
percent in the second quarter, compared with an increase of 3.5 percent in the first.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 1.7 percent in the second quarter, compared with an increase of 4.0 percent in the first.

Disposition of personal income

Current-dollar personal income increased $143.0 billion (5.8 percent) in the second quarter,
compared with an increase of $64.4 billion (2.6 percent) in the first.

Personal current taxes increased $38.1 billion, compared with an increase of $79.7 billion. Disposable personal income increased $105.0 billion (4.8 percent) in the second quarter, in contrast to a decrease of $15.3 billion (0.7 percent) in the first. Real disposable personal income increased 1.4 percent, in contrast to a decrease of 2.9 percent.

Personal outlays increased $147.1 billion (6.8 percent) in the second quarter, compared with an increase of $129.6 billion (6.1 percent) in the first. Personal saving -- disposable personal income less personal outlays -- was $18.4 billion in the second quarter, compared with $60.5 billion in the first.

The personal saving rate -- saving as a percentage of disposable personal income -- decreased from 0.7 percent in the first quarter to 0.2 percent in the second.

Current-dollar GDP

Current-dollar GDP the market value of the nation's output of goods and services -- increased 5.9 percent, or $177.4 billion, in the second quarter to a level of $12,376.2 billion. In the first quarter, current-dollar GDP increased 7.0 percent, or $203.6 billion.

The report also revised the annual economic growth rated for the last three years downwards. For the year 2004 the rate was revised to 4.4% from 4.2%, in 2003 was revised to 2.7% from 3%, and in 2002 growth was revised to 1.6% from 1.9%.

Employment Cost Index

Total compensation costs for civilian workers increased 0.7 percent from March to June 2005, seasonally adjusted, the same increase as occurred between December 2004 and March 2005, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.
Benefit costs between March and June rose 0.8 percent, compared with the gain for wagesand salaries of 0.6 percent.

The Employment Cost Index (ECI), a component of the National Compensation Survey, measures quarterly changes in compensation costs, which include wages, salaries, and employer costs for employee benefits for civilian workers (nonfarm private and State and
local government).

Increases in benefit costs accounted for over 35 percent of the rise in compensation costs for civilian workers from March to June 2005. Among private industry workers, benefit costs contributed nearly 35 percent of compensation gains during the quarter; compared with nearly 60 percent from December 2004 to March 2005.

Health insurance costs constituted about 10 percent of the compensation gains during the quarter. Among State and local government workers, benefit costs comprised nearly one-half of compensation cost gains during the March to June period, virtually unchanged from the December to March quarter. Health insurance costs represented nearly one-third of the gain
in compensation costs from March to June