The BEA's final estimate of GDP growth for the second quarter (April - June) inched up to 1.7%, from its second estimate of 1.6%. Both are down from the BEA's first estimate of 2.4%. The economy is growing more slowly than the first quarter 2010 because businesses don't need to replenish their inventory . Yes, inventory restocking is counted as economic growth, and it is what led to the boost in economic growth in Q4 2009. It was the first sign of recovery, but becomes less important in later stages.
Businesses purchases of equipment and software are driving this economic recovery, contributing 1.5% to growth. This is a huge change from the end of 2009, when business spending subtracted 2.4% from GDP. This is a normal part of the business cycle for an economy coming out of a recession. (Source: Bureau of Economic Analysis, Q2 GDP Report)
For a history of all GDP reports since 2007, see GDP Current Statistics.
What It Means to You
A 1.7% growth rate means the economy is definitely out of recession and not in danger of a double-dip. So, you can safely ignore all those doom-and-gloom claims that the sky is falling. Actually, this type of Chicken Little panic is exactly what usually happens at the end of a downturn in the business cycle. Remember back in October 2007 when the Dow rose to its all-time high of 14,164? The news media was calling for Dow 30,000 - and we were actually starting the Great Recession.
Same thing is happening now - only in reverse. The news media is calling for a double-dip - a good sign we aren't going to have one.
Not to say all will be rosy. A high foreclosure rate is dragging the economy by stifling bank lending. Growth will be anemic - between 1- 2% for several more quarters. This means unemployment will continue to hover between 9-10%, however, since growth needs to be more than 3% for businesses to add jobs.
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