The Bureau of Economic Analysis (BEA) released it second estimate of Gross Domestic Product (GDP) for the second quarter of 2011.  BEA estimates that during the second quarter of 2011 real GDP increased an annual rate of 1.0%.  This represents a downward revision of its first estimate of 1.3% released in July.  Real GDP grew at an annual rate of 0.4% during the first quarter.

 According to BEA, the increase in real GDP in the second quarter resulted primarily from increases in nonresidential fixed investment, exports, personal consumption expenditures (PCE), and federal government spending.  Those positive contributions were largely offset by negative contributions from state and local government spending and private inventory investment.

The acceleration in real growth to 1.0% in the second quarter from 0.4% in the first quarter primarily reflected a slowing in imports, higher federal government spending, and higher nonresidential fixed investment.  However, those increases were partly offset by slower growth in personal consumption expenditures (PCE) and imports as well as a downturn in private inventory investment.

•  Real personal consumption expenditures increased 0.4% in the second quarter, compared with an increase of 2.1% in the first. 
• Real nonresidential fixed investment increased 9.9%, compared with an increase of 2.1%. 
•  Nonresidential structures increased 15.7%, in contrast to a decrease of 14.3%.
•  Equipment and software increased 7.9%, compared with an increase of 8.7%. 
•  Real residential fixed investment increased 3.4%, in contrast to a decrease of 2.4%.
•  Real exports of goods and services increased 3.1% in the second quarter, compared with an increase of 7.9% in the first.  Real imports of goods and services increased 1.9%, compared with an increase of 8.3%.
•  Real federal government consumption expenditures and gross investment increased 2.0% in the second quarter, in contrast to a decrease of 9.4% in the first.  National defense increased 7.1%, in contrast to a decrease of 12.6%.  Nondefense decreased 7.5%, compared with a decrease of 2.7%.  Real state and local government consumption expenditures and gross investment decreased 2.8%, compared with a decrease of 3.4%.
•  Real final sales of domestic product -- GDP less change in private inventories -- increased 1.2% in the second quarter, after increasing less than 0.1%.

 The “second” estimate of the second quarter increase in real GDP is 0.3%, or $9.6 billion, lower BEA’s first estimate, primarily reflecting downward revisions to private inventory investment and to exports that were partly offset by upward revisions to nonresidential fixed investment and to personal consumption expenditures (PCE).

 BEA will release its third estimate for second quarter GDP on September 29, 2011 at 8:30 a.m.

 Consumer Sentiment The full month reading for the Reuters/University of Michigan consumer sentiment index came in at 55.7 from a mid-month reading of 54.9 implying a level of 56.5 over the past two weeks.  The small improvement was in the leading expectations component which increase 1.7 points to 47.4.   Current levels of the leading expectations component are lower than at any point since the Iranian hostage crisis and oil crisis in the early 1980s.   The current conditions component actually weakened during the second half of August falling to 68.7 from a mid-month reading of 69.3.  These levels are consistent with levels during late 2008 and early 2009.

 Federal Reserve Action Fed Chairman Ben Bernanke did not point to any further activism on the part of the FOMC in the near future during his speech at the Federal Reserve Bank of Kansas City’s “Jackson Hole” conference.   The FOMC’s September meeting, originally scheduled for a single day, will be held on September 20 and September 21.   Bernanke had used his speech at the annual conference last year to announce the Fed’s intention to embark upon a second round of quantitative easing (known as QE2).