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GDP increase of 4.2% reverses Q1 decline
WASHINGTON (8/29/14)--Gross domestic product expanded at a 4.2% on an annualized basis, according to the Bureau of Economic Analysis (BEA), an upward revision of the BEA's previously reported 4% growth and a reversal of the 2.1% decline in the first quarter.
 
Consumer spending made the largest contribution adding 1.7 percentage points to the expansion. Inventory investment, exports and fixed investment were also sources of growth ( Economy.com Aug. 28). Inflation accelerated in the second quarter, led by food and energy prices. Real disposable income growth accelerated.
 
The biggest drag on growth came from imports, which reduced growth by 1.7%.
 
Revisions were positive with growth revised up, particularly from final sales. Profits rose 8% (not annualized) mostly reversing the first-quarter decline. Gross domestic income surged 4.7% after falling 0.8% in the first quarter.
 
Final sales, which exclude the support to GDP from inventories, were weaker, rising 2.8%. That increase follows decline of 1%, which was the largest drop since the first quarter of 2009.
 
The personal consumption expenditures index showed inflation accelerated in the second quarter. It rose 2.3% in the quarter, up from 1.4% the prior three months. Excluding food and energy, inflation rose 2%, up from 1.2% the prior quarter. Neither figure was revised.


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