Bill McBride at Calculated Risk:
Real gross domestic product ... increased at an annual rate of 4.0 percent in the second quarter of 2014... In the first quarter, real GDP decreased 2.1 percent (revised).
The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The advance Q2 GDP report, with 4.0% annualized growth, was above expectations of a 2.9% increase. Also Q1 was revised up.
Personal consumption expenditures (PCE) increased at a 2.5% annualized rate - a decent pace. Private investment rebounded with residential investment up 7.5% annualized, and equipment up 5.3%. Change in private inventories added 1.66 percentage points to growth after subtracting 1.16 in Q1.
Overall this was a solid report. I'll have more later on the report and revisions.
Update: Dean Baker:
Economy Rebounds in Second Quarter Based on Inventories and Cars: GDP grew at a 4.0 percent annual rate in the second quarter after shrinking at a 2.1 percent rate in the first quarter. Much of the shift was due to a considerably more rapid pace of inventory accumulation. Inventory changes which had subtracted 1.16 percentage points from first quarter growth added 1.66 percentage points to growth in the second quarter. New car sales added another 0.42 percentage points to growth, after adding just 0.13 percentage points in the first quarter. Equipment investment, which grew at a 7.0 percent rate, added another 0.4 percentage points to growth for the quarter.
Another positive item in this report was continued slow growth in health care costs. After a reported drop in the first quarter, health care costs grew at a 2.6 percent annual rate. They stand just 3.0 percent above their year-ago level.
On the negative side, the trade deficit expanded again last quarter rising to an annual rate of $564.0 billion. It subtracted 0.61 percentage points from growth in the quarter.
While the 4.0 percent growth is a sharp turnaround, it was very much in line with expectations. It means that for the first half of the year, the economy the economy grew at less than a 1.0 percent annual rate. The economy will have to sustain a growth rate of more than 3.0 percent over the second half of the year just to reach 2.0 percent growth for the year as a whole. This means 2014 will likely be another disappointing year for growth.