Meet the Author

John Lindner |

Research Analyst

John Lindner

John Lindner is a former research analyst in the Research Department of the Federal Reserve Bank of Cleveland.

Meet the Author

Brent Meyer |


Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.


Economic Trends

Real GDP: Second-Quarter 2009 Revised Estimate

John Lindner and Brent Meyer

Real GDP was virtually unchanged in the latest revision of the second-quarter estimate, falling at an annualized rate of −1.0 percent. While the headline number was unchanged, there were some interesting moves in the components. Nonresidential investment in structures was revised down from an 8.8 percent decrease to a 15.1 percent decrease, helping to pull the growth rate in overall business fixed investment down by 2.0 percentage points (pp) to −10.9 percent (which is still a substantial improvement over the first quarter’s 39.2 percent decrease). Conditions on the consumer side of things looked a little less dismal after the revision. Real personal consumption was revised up from −1.2 percent to −1.0 percent. Also, residential investment was revised up from −29.3 percent to −22.8 percent and looks to be less of a drag on overall output, given the recent indicators on housing.

Real GDP and Components, 2009:Q2 Second Estimate

Quarterly change,
billions of 2005 $
Annualized percent change, last:
Four quarters
Real GDP
Personal consumption
Business fixed investment
Residential investment
Government spending
  National defense
Net exports
Private inventories

Source: Bureau of Economic Analysis.


There were also upward revisions to exports, residential investment, consumption, and government spending that were roughly offset by downward adjustments to inventories and business fixed investment. The downward revision to inventories subtracted an additional 0.6 pp from real GDP growth, but this may imply they will make more of a contribution to growth in the third quarter (assuming a tapering off in the inventory contraction). Personal consumption, residential investment, and exports all added 0.2 pp to output growth.

The consensus forecast for 2009 real GDP remained at −2.6 percent during the August survey, though the consensus forecast for the second half of 2009 increased (likely a result of the downward revision to the first-quarter GDP estimate during the BEA’s benchmarking process). The consensus estimate for 2010 growth ticked up again, this month by 0.3 pp to 2.3 percent, its third upward revision in four months. Looking ahead through the rest of the year, even pessimists are predicting positive GDP growth for the rest of this year and into 2010.

Results from two special questions on the Blue Chip survey lend support to the view that this recovery will be slower than postwar trends would suggest. Nearly 90 percent of the respondents believe that the U.S. recession will come to an end by before the third quarter closes, but their expectations for the path of recovery are noteworthy. Two-thirds of the respondents predict a U- or an L-shaped economic recovery, which would result in a slower than normal upturn. Assuming that the second quarter is the trough, or the end of the decline in output, real GDP has fallen nearly 4.0 percent from the beginning of the recession. Historical trends have shown that deeper recessions have typically led to sharper recoveries, yet the consensus growth path derived from the Blue Chip survey calls for a much more sluggish rebound. The Blue Chip responses suggest that professional forecasters see some sort of structural difference—a failure of the consumer to return to prior spending habits, for example—between this recession and those of the past. This is consistent with research by Reinhart and Rogoff (2008), which finds that recoveries from recessions caused by financial panics are more muted than others.