Despite a marked slowdown in consumption growth to less than 1% annualised, it appears that overall GDP growth may actually have picked up a little to 2.3% in the second quarter, from 1.9% in the first. Previously we thought that growth would be about 2.0%, but the latest monthly data have persuaded us to revise that estimate up a little. The Japanese earthquake caused a decline in both US vehicle production and sales, but the effect on overall GDP was partially offset by a drop in imports from Japan. In addition, the second quarter saw a rebound in military spending and a jump in home renovation after all the tornadoes in April and May. Third-quarter GDP growth could be even stronger, as falling energy prices boost real incomes, but we still think that growth will slow again in 2012 as the fiscal consolidation really begins to bite.
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