"Real gross domestic product (GDP) increased 1.7 percent in the second quarter of 2013 after increasing 1.1 percent in the first quarter, according to the “advance” estimate released today [July 31, 2013] by the Bureau of Economic Analysis (BEA)."One would say that the reported growth of the annualized estimate of the U.S. GDP (+1.7%) outperforms the expected result.
We recall that the official GDP is calculated at constant prices, i.e, by applying a deflator to the current values.
In practice, it takes account of the specific rate of inflation in the components of GDP. Obviously the lower the GDP deflator the higher the GDP.
Well, the deflator used by the BEA for the second quarter was a tiny +0.71% whilst in the first quarter it was +1.7% and in the last 14 quarters, the U.S. GDP deflator was +1.75% on average.
It sounds a bit odd !
If the GDP deflator were what the market was expecting (i.e., +1.6%), the U.S. GDP would grow in the second quarter only by 0.8% annualized (i.e., just a faint +0.2% quarter-on-quarter).
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