Second-Quarter National Economic Activity And Third-Quarter Outlook - Second-Quarter 1987

The real gross national product (GNP) expanded by 2.3% during the second quarter, down from the anomalous 4.4% growth rate in the previous 3 months. If the expansion continues through October, it will have lasted 5 yr and become the second longest in 40 yr.2 As in the first quarter, improvement in U.S. exports played a role in the continuing--albeit slow--growth. More than 2 yr of declines in the dollar relative to currencies of other industrial countries have contributed to a slight reduction in the trade deficit in real (volume) terms, as real net exports of goods and services rose $1.9 billion (table 1). Exports grew a strong 12.1% while imports, which had fallen the previous two quarters, rose 7.4%. Manufactured goods and petroleum products accounted for most of the second quarter import increase. The American Petroleum Institute estimates that the volume of crude oil and refined products imports in the first half of 1987 surpassed those in the same period last year by 7.5%, reflecting falling domestic production and higher than expected demand. Expenditure on durable goods--those that last at least 3 yr-by both consumers and producers also contributed to the second quarter expansion. Personal consumption of durable goods rose 9.0%, after having fallen the two previous quarters. Motor vehicle purchases accounted for most of the second quarter increase and the first quarter decrease. Sales of automobiles surged in the last quarter of 1986, as consumers rushed to capture the sales tax deduction that was eliminated on January 1. Sales fell in the first quarter of 1987, but have now moved closer to the trend line exhibited in the first three quarters of 1986. Automobiles accounted for half the 0.8% July gain in retail sales, and two-thirds of the 1.4% June gain. Producers durable equipment purchases also rose this quarter, accounting for the increase in nonresidential fixed investment.