The second quarter was worse than we thought. The new estimate of GDP released today revised growth down to 1.6% from the first estimate of 2.4%, according to the Bureau of Economic Analysis. Considering that the initial estimate was somewhat disappointing after much better growth in the prior two quarters, this second number is extremely discouraging. Economists mostly saw this coming, however. Their prediction for the revision was just a little worse at 1.3%. The change can be mostly blamed on weaker net exports and business investment.
But before getting into any of the specifics, here's the historical GDP growth chart:
You can see that Q2 growth now matches that of the third quarter of 2009, when the technical recovery began.
As mentioned, one of the biggest drivers of the revision was net exports. The U.S. imported even more and exported even fewer goods and services than first estimated. Exports only grew by $35.8 billion instead of $40.3 billion as was initially thought. Imports, however, were way off. They grew by $142.2 billion, well above the $127.8 first estimate. That resulted in the trade gap growing by $19.0 billion more than anticipated, pulling down the initial GDP growth estimate by 0.6%. As Americans buy more goods and services from abroad than they sell to those nations, it results in less national income.