GDP Expands 1.2% in Second Quarter of 2016, Well Below Expectations

Growth down from second quarter growth in previous year

cash money
Credit: Flickr user Keith Cooper

The U.S. economy expanded in the second quarter of 2016 as real gross domestic product grew at a rate of 1.2 percent, which was well below expectations, according to the advance estimate released by the Bureau of Economic Analysis.

Real GDP represents the value of the production of goods and services in the economy and is adjusted for inflation. The second quarter growth in 2016 of 1.2 percent, which includes performance from April, May, and June, was an increase from the 0.8 percent growth seen in the first quarter of 2016.

Growth from the first quarter was revised down from previous estimates. "For the first quarter of 2016, real GDP is now estimated to have increased 0.8 percent; in the previously published estimates, first-quarter GDP was estimated to have increased 1.1 percent," the bureau states.

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Economists predicted that second quarter growth would be much greater than 1.2 percent. According to economists surveyed by the Wall Street Journal, second quarter growth was projected to expand at 2.6 percent.

Real GDP in the second quarter of 2016 also showed a decline from the previous year, when GDP expanded at 2.3 percent in the second quarter of 2015, according to the advance estimate.

"The economy has grown at less than 2 percent pace for three straight quarters," the Wall Street Journal wrote. "Since the recession ended seven years ago, the expansion has failed to achieve the breakout growth seen in past recoveries. The average annual growth rate during the current business cycle remains the weakest of any expansion since at least 1949."

"The increase in real GDP in the second quarter reflected positive contributions from personal consumption measures and exports that were partly offset by negative contributions from private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending," the bureau said. "Imports, which are a subtraction in the calculation of GDP, decreased."

The bureau will release its second estimate for the second quarter of 2016 on Aug. 26.