Second quarter real GDP growth was revised upward slightly to an annualized 1.7 percent from an annualized 1.6 percent. The adjustment was due to an upward revision to consumption and inventory accumulation. However, most of this improvement was offset by downward revisions to net exports and government spending. The updated GDP number is consistent with a modestly growing economy.
Net-exports were a huge drag on growth in the second quarter. This was partially due to the fallout following the Euro debt crisis in the spring, causing exports to fall and the dollar to strengthen, which supported greater import growth. In addition, the inventory adjustment cycle on the part of businesses, which had been the primary factor of growth in the three quarters prior, has mostly run its course. Moving forward, the real GDP number will come more in line with the real final sales number, which measures only present use of production. As such, growth has been, and will likely continue to be in the near future only modest.
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